AMENDED AND RESTATED EMPLOYMENT AGREEMENT
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This Amended and Restated Employment Agreement (the "Agreement") is
entered into as of January 2, 1998, between DAMARK INTERNATIONAL, INC., a
Minnesota corporation (including its subsidiaries, the "Company"), located in
Minneapolis, Minnesota, and XXXX X. XXXX ("Executive").
RECITALS:
A. The Company currently employs the Executive as its Chairman and Chief
Executive Officers pursuant to an Employment Agreement dated as of August 12,
1992, as amended by an Amendment to Employment Agreement dated as of July 17,
1995 (the "Employment Agreement").
B. In connection with the direction of the Board of Directors of the
Company to provide certain severance benefits and change of control protections
to the executives of the Company, the Company and the Executive wish to amend
and restate the Employment Agreement in its entirety so as to provide those
benefits and protections at a level appropriate to the Executive.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Executive agree as follows:
1. DEFINITIONS. The following terms as used herein shall have the
following meanings:
(a) "Annual Bonus" means the cash annual bonus based on the
achievement by the Company of performance goals or any short term incentive or
bonus plan established by the Board of Directors or the Compensation Committee
of the Board of Directors from time to time.
(b) "Base Salary" means the base salary payable to the Executive
pursuant to paragraph 2(c).
(c) "Cause" means termination of the Executive in the event that
the Executive: (i) has repeatedly failed to perform the material duties
specified for the position to which the Executive has been elected, which
failure is willful and deliberate; (ii) has engaged in an act or acts of
dishonesty which is or are intended to result in substantial personal
enrichment for the Executive; (iii) has knowingly engaged in conduct which is
materially injurious to the Company; (iv) is convicted of, or pleads NOLO
CONTENDERE to (A) any felony (other than any felony arising out of
negligence), or (B) any crime or offense involving dishonesty with respect to
the Company; (v) has failed to comply with the covenants contained in
paragraphs 9, 11 and 12 of this Agreement as determined in accordance with
paragraph 14 hereof; or (vi) knowingly provides materially misleading
information concerning the Company to the Board of Directors of the Company,
any governmental body or regulatory agency or any lender or other financing
source or proposed financing source of the Company.
(d) A "Change in Control" shall be deemed to have occurred if:
(i) any "Person" or "Persons" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934) (other than
the Company, any employee benefit plan of the Company, the Executive or any
entity which reports beneficial ownership of the Company's outstanding
securities on Schedule 13G pursuant to Regulation Section 240.13d-1
promulgated under the Securities Exchange Act of 1934) becomes a beneficial
owner, directly or indirectly, of securities of the Company representing 35%
or more of the voting power of all of the Company's then outstanding
securities; or
(ii) during any period of two consecutive years, individuals
who at the beginning of such period constituted the Board of Directors of the
Company (the "Incumbent Directors") together with any director (the "New
Incumbent Director") whose nomination or election was approved by at least
two-thirds of the Incumbent Directors and any New Incumbent Director who was
previously elected, cease for any reason to constitute at least a majority of
the Board of Directors of the Company; or
(iii) the shareholders of the Company approve the sale of all,
or substantially all, of the business or assets of the Company or the
liquidation or dissolution of the Company, or the shareholders of the Company
approve the merger, consolidation or other corporate reorganization of the
Company under circumstances in which the Company will not be the surviving
party.
(e) "Confidential Information" means any information which is
proprietary or unique to the Company, including but not limited to trade
secret information, matters of a technical nature such as processes, devices,
techniques, data and formulas, research subjects and results, marketing
methods, plans and strategies, operations, products, revenues, expenses,
profits, sales, key personnel, customers, suppliers, pricing policies, any
information concerning the marketing and other business affairs and methods
of the Company which is not readily available in the Company's industry, and
any information the Company has indicated is confidential.
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(f) "Good Reason" means termination by the Executive in the event
that (i) the Executive is not at all times the duly elected to the positions
of the Chairman, President and Chief Executive Officer of the Company (with
such changes as the Executive may agree in writing); (ii) there is any
material reduction in the scope of the Executive's authority and
responsibility; (iii) there is a reduction in the Executive's Base Salary, a
material reduction in the amount of Annual Bonus for which the Executive is
eligible, an amendment to any Stock Incentives or employee retirement plan
applicable to the Executive which is materially adverse to the Executive, or
a material reduction in the other benefits to which the Executive is
entitled; (iv) the Company requires the Executive's principal place of
employment to be anywhere other than the Company's principal executive
offices, or there is a relocation of the Company's principal executive
offices outside of Minneapolis/St. Xxxx, Minnesota metropolitan area; (v) the
Company otherwise fails to perform its obligations under this Agreement; (vi)
a Change in Control has occurred and either (x) the Executive dies or becomes
permanently disabled (as determined by reference to the Company's long-term
disability plan) prior to the first anniversary of the Change in Control or
(y) elects to terminate employment with the Company regardless of the reason
therefor by giving the Company written notice thereof within the 60-day
period immediately following the first anniversary of the Change in Control,
regardless of the reason therefor, or (vii) the Company fails to obtain the
agreement of a successor referred by paragraph 18 hereof prior to the
effectiveness of any succession (unless the opinion described in paragraph 18
hereof is rendered to the Executive).
(g) "Stock Incentives" means stock options, restricted stock,
stock appreciation rights, stock performance units or other stock incentives
granted to the Executive by the Compensation Committee of the Board of
Directors under any stock-based plan from time to time adopted by the Company.
(h) "Termination Date" means the date on which the Executive
ceases to be an employee of the Company.
(i) "Work Product" means all inventions, creations, innovations,
improvements, technical information, systems, software developments, methods,
designs, analyses, drawings, reports, service marks, trademarks, tradenames,
logos and all similar or related information (whether patentable or
unpatentable) which relate to the Company's actual or anticipated business,
research and development or existing or future products or services which are
conceived, developed or made by the Executive (whether or not during usual
business hours and whether or not alone or in conjunction with any other
person) while employed by the Company (including those conceived, developed
or made prior to the date of this Agreement), together with all patent
applications, letters patent, trademark, tradename and service xxxx
applications or registrations, copyrights and reissues thereof that may be
granted for or upon any of the foregoing.
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2. EMPLOYMENT AND DUTIES; TERM OF EMPLOYMENT; COMPENSATION.
(a) EMPLOYMENT AND DUTIES. For the term stated in paragraph 2(b),
the Company hereby agrees to employ the Executive, and the Executive hereby
accepts employment, to perform the duties and responsibilities of a chairman,
president and chief executive officer, together with such other
responsibilities as are consistent with such position and as are assigned by
the Board of Directors from time to time, and to serve as the Chairman,
President and Chief Executive Officer of the Company, subject at all times to
the performance by the Board of Directors of the Company of its
responsibilities with regard to the management and affairs of the Company.
The Executive agrees to devote his full business time and effort to the
diligent and faithful performance of his duties under the direction of the
Board of Directors of the Company. Such duties shall be performed from the
Company's principal executive office in Minneapolis, Minnesota.
(b) TERM OF EMPLOYMENT. Unless terminated as provided herein, the
term of this Agreement shall commence on the date hereof and shall continue
through December 31, 2000, provided that the term shall be automatically
extended for one year on each January 1st, commencing January 1, 1999, unless
either party gives written notice to the other prior to the date on which the
automatic extension would be effective.
(c) BASE SALARY. As compensation for his services, Xxxx shall be
paid a base salary at a minimum annual rate of $475,000 payable in accordance
with the Company's customary payroll practices, which salary shall be
reviewed and may be increased (but not decreased without the Executive's
written consent) from time to time at the discretion of the Compensation
Committee of the Board of Directors.
(d) ANNUAL BONUS. In addition to his Base Salary, the Executive
also shall be eligible to receive an Annual Bonus.
(e) OTHER BENEFITS. The Executive shall be entitled to
participate in the Company's regular health, life, pension, vacation and
disability plans in accordance with their respective terms, provided that
nothing herein shall be construed to limit the Company's discretion to amend,
terminate or otherwise modify any such plans. The Company will also provide
(i) such employee benefits to the Executive in respect of his employment as
the Company customarily provides from time to time to its executive officers,
and (ii) a car allowance to the Executive of $1,500 per month.
3. TERMINATION OF EMPLOYMENT PRIOR TO A CHANGE IN CONTROL OF THE
COMPANY.
(a) DEATH OR DISABILITY. In the event of the Executive's death or
disability (as defined in the Company's disability plan then in effect), the
Company's obligation to make further Base Salary payments hereunder shall
thereupon terminate. The Executive shall be entitled to receive (i) the
Annual Bonus payable with respect to the year prior to death or disability if
it has not yet been paid, and (ii) the Annual Bonus payable with respect to
the year
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in which death or disability occurs, prorated for the portion of such year up
to the Termination Date which shall be payable at the time the Annual Bonus
for such year is paid to other executives of the Company. The Executive's
rights to other compensation and benefits shall be determined under the then
effective benefit plans and policies of the Company applicable to executives.
(b) TERMINATION FOR CAUSE BY THE COMPANY. By following the
procedure set forth in paragraph 4(d), the Company shall have the right to
terminate the employment of the Executive for Cause. If the employment of
the Executive is terminated by the Company for Cause, the Executive's rights
to compensation and benefits shall be determined under the Company's benefit
plans and policies applicable to executives of the Company then in effect.
The Executive shall have no right to severance benefits under this paragraph
3, but shall continue to be obligated under paragraphs 9, 11 and 12 hereof.
The Executive shall have the right to continue health and life insurance
under COBRA laws in effect on the Termination Date.
(c) TERMINATION WITHOUT CAUSE. If the Company terminates the
Executive without Cause, the Executive shall be entitled to the severance
benefits described in paragraph 3(g).
(d) TERMINATION FOR GOOD REASON BY THE EXECUTIVE. By following
the procedure set forth in paragraph 4(d), the Executive shall have the right
to terminate his employment with the Company for Good Reason. If the
employment of the Executive is terminated by the Executive for Good Reason,
the Executive shall be entitled to the severance benefits set forth in
paragraph 3(g).
(e) VOLUNTARY RESIGNATION. The Executive may voluntarily
terminate his employment without Good Reason prior to the expiration of the
term of this Agreement by giving the Company at least sixty (60) days prior
written notice or such shorter period of time as the Company's Board of
Directors may determine. In the event the Executive voluntarily resigns, (i)
the Executive's rights to further Base Salary payments and the Annual Bonus
(except for the Annual Bonus prorated for the portion of the year up to the
Termination Date which prorata amount shall be paid at the time the annual
bonus are paid to other executives of the Company) shall terminate on the
effective date of such resignation, (ii) the Executive's rights to other
compensation and benefits shall be determined under the benefit plans and
policies applicable to the Company's executives as then in effect, and (iii)
the Executive shall continue to be obligated under paragraphs 9, 11 and 12
hereof.
(f) NOTICE AND RIGHT TO CURE. If the Company proposes to
terminate the employment of the Executive for Cause under paragraph 3(b), the
Company shall give written notice to the Executive specifying the reasons for
such proposed termination with particularity and, in the case of a
termination for Cause under clauses (i), (ii), (iii) and (vi) of the
definition thereof, the Executive shall have a reasonable opportunity to
correct any curable situation to the reasonable satisfaction of the Company,
which period shall be no less than 10 days from the Executive's receipt of
the notice of proposed termination nor longer than the period specified in
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such notice. Termination for Cause shall be effective as specified in
paragraph 20 or, in the case of termination for Cause under clauses (i),
(ii), (iii) and (vi) of the definition thereof, following the period of the
opportunity to correct if no correction has been made.
(g) SEVERANCE BENEFITS UPON TERMINATION. If the Executive's
employment is terminated without Cause by the Company or for Good Reason by
the Executive prior to a Change in Control, the Executive shall be entitled
to the following severance compensation and benefits:
(i) BASE SALARY. The Company shall pay the Executive the
Executive's Base Salary for a period of 36 months from the Termination Date
in accordance with the Company's normal salary payment practices.
(ii) BONUS. If the Termination Date occurs before the
Annual Bonus for any preceding year has been paid, the Company shall pay to
the Executive the amount of the Executive's Annual Bonus for the preceding
year when and as it would have been paid if the Executive had remained
employed by the Company. In addition, the Company shall pay the Executive an
amount equal to the average of the Annual Bonus paid or payable to the
Executive for the two years immediately preceding the year in which the
termination occurs multiplied by a fraction, the numerator of which is the
number of months remaining in the term of this Agreement after the end of the
last year for which Annual Bonus for the Executive was determined and the
denominator of which is 12, which amount of Annual Bonus shall be paid to the
Executive when and as it would have been paid if the Executive had remained
employed by the Company.
(iii) DISABILITY, LIFE INSURANCE AND MEDICAL/DENTAL COVERAGE;
NO UNPAID VACATION OR SICK LEAVE. The Company, shall continue the
disability, life insurance and medical/dental coverage provided to the
Executive immediately prior to the Termination Date, subject to then existing
Executive contribution requirements. Such coverage shall be provided through
the earlier to occur of the third anniversary of the Termination Date or the
date on which the Executive obtains comparable coverage provided by a new
employer. If and to the extent additional benefits are available, the
Executive has the right to continue health and life insurance benefits under
COBRA laws in effect on the Termination Date. The Executive shall not be
deemed to have and shall not be paid for any unpaid vacation or sick leave.
(iv) STOCK INCENTIVES. The Executive's rights and the
Company's obligations with respect to Stock Incentives shall be as described
in the applicable Company plan and the applicable separate agreements with
the Executive, provided that in no event shall the payment of severance
benefits hereunder be deemed to be an extension of Executive's employment for
purposes of the vesting provisions of such plans and agreements.
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(v) OUTPLACEMENT SERVICES. The Company shall pay the
reasonable fees and expenses of up to 10% of the Executive's Base Salary for
the Executive's use of a qualified outplacement service, provided that the
use of such outplacement counseling is initiated within 90 days of the
Termination Date.
(vi) WITHHOLDING. Notwithstanding anything to the contrary
herein, the Company shall withhold from all severance benefits payable
hereunder the sum of federal, state and local taxes and other amounts which
the Company is required by law or believes appropriate to withhold.
(vii) REIMBURSEMENT OF BUSINESS EXPENSES. The Company will
reimburse the Executive for all business expenses incurred prior to the
Termination Date at the time and in the manner consistent with Company policy.
4. TERMINATION FOLLOWING A CHANGE IN CONTROL OF THE COMPANY. In the
event of a Change in Control and within (and including) 24 months thereafter,
the following provisions shall apply:
(a) TERMINATION FOR CAUSE BY THE COMPANY. By following the
procedure set forth in paragraph 4(d)(i), the Company shall have the right to
terminate the employment of the Executive for Cause. If the employment of
the Executive is terminated by the Company for Cause, the Executive's rights
to compensation and benefits shall be determined under the Company's benefit
plans and policies applicable to executives of the Company then in effect.
(b) TERMINATION FOR GOOD REASON BY THE EXECUTIVE. By following
the procedure set forth in paragraph 4(d)(ii), the Executive shall have the
right to terminate the Executive's employment with the Company for Good
Reason and shall be entitled to the severance benefits set forth in
paragraph 4(e).
(c) TERMINATION WITHOUT CAUSE; VOLUNTARY RESIGNATION. If the
Company terminates the Executive's employment without Cause, the Executive
shall be entitled to the severance benefits set forth in paragraph 4(e). The
Executive may voluntarily terminate his employment without Good Reason (other
than as provided in paragraph 4(b)) prior to the expiration of the term of
this Agreement, and in such event the Executive's rights to further Base
Salary payments and Annual Bonus (except Annual Bonus prorated to the
Termination Date) shall terminate on the effective date of such resignation,
the Executive's rights to other compensation and benefits shall be determined
under the benefit plans and policies applicable to the Company's executives
as then in effect, and the Executive shall continue to be obligated under
paragraphs 9, 11 and 12 hereof.
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(d) NOTICE AND RIGHT TO CURE.
(i) TERMINATION BY COMPANY FOR CAUSE. If the Company
proposes to terminate the employment of the Executive for Cause, the Company
shall give written notice to the Executive specifying the reasons for such
proposed termination with particularity and, in the case of a termination for
Cause under clause (i) of the definition thereof, the Executive shall have a
reasonable opportunity to correct any curable situation to the reasonable
satisfaction of the Board of Directors of the Company, which period shall be
no less than 30 days from the Executive's receipt of the notice of proposed
termination. Notwithstanding the foregoing, the Executive's employment shall
not be terminated for Cause unless and until there shall be delivered to the
Executive a copy of the resolution duly adopted by the affirmative vote of
not less than the majority of the members of the Board of Directors of the
Company at a meeting called and held for the purpose (after reasonable notice
to the Executive and an opportunity for the Executive, together with the
Executive's legal counsel, to be heard before the Board of Directors) finding
that, in the opinion of the Company's Board of Directors, the Executive has
engaged in conduct justifying a termination for Cause.
(ii) TERMINATION BY EXECUTIVE FOR GOOD REASON. If the
Executive proposes to terminate the Executive's employment for Good Reason
(other than a termination for Good Reason under clause (vi) of the definition
thereof), the Executive shall give written notice to the Company specifying
the reason therefor with particularity. In the event the Executive proposes
to terminate employment for Good Reason under clauses (i), (ii), (iii), (iv)
or (vii) of the definition thereof, the Termination Date shall be the date of
such notice. In the event the Executive proposes to terminate employment for
Good Reason under clause (vi) of the definition thereof, the Termination Date
shall be the tenth calendar day following such notice or, in the case of
death or disability, the date on which the Executive dies or becomes
disabled. In the event the Executive proposes to terminate employment for
Good Reason under clause (v) of the definition thereof, the Company will have
an opportunity to correct any curable situation to the reasonable
satisfaction of the Executive within the period of time specified in the
Executive's notice which shall not be less than 30 days. If such correction
is not so made or the circumstances or situation is such that it is not
curable, within 30 days after the expiration of the time so fixed within
which to correct such situation, the Executive may give written notice to the
Company that the Executive's employment is terminated for Good Reason and the
Termination Date shall be the date of such notice.
(e) SEVERANCE BENEFITS FOR CHANGE IN CONTROL.
(i) BASE SALARY. The Company shall pay the Executive a
lump sum cash payment, no later than 10 days after the Termination Date, in
an amount equal to the Executive's Base Salary multiplied by three.
(ii) ANNUAL BONUS. The Company shall pay the Executive a
lump sum cash payment, no later than 10 days after the Termination Date, in
an amount equal to (a) the greater of (x) the product of 2 multiplied by the
quotient obtained by dividing the sum of the
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Annual Bonuses, if any, paid to the Executive during the three calendar years
immediately preceding the Termination Date by three (the "Prior Bonus
Amount"), and (y) two times the Executive's target Annual Bonus for the
current calendar year, assuming achievement of performance permitting payment
of 100% of the target Annual Bonus, PLUS (b) the Executive's target Annual
Bonus for the current calendar year, assuming achievement of performance
permitting payment of 100% of the target Annual Bonus, pro rated for the
number of calendar months (including any partial month as a full calendar
month) preceding the Termination Date. If the Annual Bonus for the calendar
year immediately preceding the Termination Date has not been determined, the
Company shall pay the Executive the target Annual Bonus for the current
calendar year, calculate the Prior Bonus Amount as soon as practicable, and
pay the Executive the Prior Bonus Amount promptly following calculation.
(iii) DISABILITY, LIFE INSURANCE AND MEDICAL/DENTAL COVERAGE;
NO UNPAID VACATION OR SICK LEAVE. The Company shall continue the disability,
life insurance and medical/dental coverage provided to the Executive
immediately prior to the Termination Date. Such coverage shall be provided
by the Company at its sole cost until the third anniversary of the
Termination Date. If and to the extent additional benefits are available,
the Executive has the right to continue health and life insurance benefits
under COBRA laws in effect on the Termination Date. The Executive shall not
be deemed to have and shall not be paid for any unpaid vacation or sick leave.
(iv) STOCK INCENTIVES. Not later than 30 days after the
Termination Date, the Company shall pay the Executive a lump sum cash payment
equal to the amount by which the fair market value (determined as of the
Termination Date) of the number of shares of stock subject to any Stock
Incentive granted to the Executive is in excess of the exercise price or
other amount of payment required to be made by the Executive thereunder, but
only to the extent that the Executive is not entitled to exercise his Stock
Incentives after the Termination Date under the provisions of the Executive's
Stock Incentive agreements.
(v) OTHER DEFERRED BENEFITS. Not later than 30 days after
the Termination Date, the Company shall pay the Executive a lump sum cash
payment in an amount equal to the sum of the unvested portion of all other
deferred benefits, including without limitation deferred compensation,
retirement and profit-sharing plans, but only to the extent that the
Executive is not entitled to receive such benefits immediately following the
Termination Date under the provisions of the applicable agreements.
(vi) OUTPLACEMENT SERVICES. The Company shall pay
reasonable fees and expenses, in an amount equal to 15% of the Executive's
Base Salary, for the Executive's use of a qualified outplacement service,
provided that the use of such outplacement counseling is initiated within one
year of the Termination Date.
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(vii) WITHHOLDING. Notwithstanding anything to the contrary
herein, the Company shall withhold from all severance benefits payable
hereunder the sum of federal, state and local taxes and other amounts which
the Company is required by law or believes appropriate to withhold.
5. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) GROSS-UP PAYMENT. Anything to the contrary notwithstanding,
in the event it shall be determined that any payment, distribution or benefit
made or provided by the Company to or for the benefit of the Executive
(whether pursuant to this Agreement or otherwise) (a "Payment"), would be
subject to the excise tax imposed by Section 4999 of the Internal Revenue
Code of 1986, as amended (the "Code"), or any interest or penalties with
respect to such excise tax (such excise tax, together with any such interest
and penalties, being collectively referred to as the "Excise Tax"), then the
Company shall pay the Executive in cash an amount (the "Gross-Up Payment")
such that, after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including but not
limited to income taxes (and any interest and penalties imposed with respect
thereto) and the Excise Tax imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-up Payment equal to the Excise Tax imposed on
the Payments. An example of the calculation of the Gross-Up Payment is
attached hereto as Exhibit A.
(b) DETERMINATION OF GROSS-UP PAYMENT. Subject to paragraph 5(c),
all determinations required to be made under this paragraph 5, including
whether a Gross-Up Payment is required and the amount of the Gross-Up
Payment, shall be made by the firm of independent public accountants selected
by the Company to audit its financial statements for the year immediately
preceding the Change in Control (the "Accounting Firm") which shall provide
detailed supporting calculations to the Company and the Executive within 30
days after the Termination Date. In the event that the Accounting Firm is
serving as accountant or auditor for the individual, entity or group
effecting the Change in Control, the Executive may appoint another nationally
recognized accounting firm to make the determinations required under this
paragraph 5 (which accounting firm shall then be referred to as the
"Accounting Firm"). All fees and expenses of the Accounting Firm in
connection with the work it performs pursuant to this paragraph 5 shall be
promptly paid by the Company. Any Gross-Up Payment (as determined pursuant
to this paragraph 5) shall be paid by the Company to the Executive within 5
days of the receipt of the Accounting Firm's determination. If the
Accounting Firm determines that no Excise Tax is payable by the Executive, it
shall furnish the Executive with a written opinion that failure to report the
Excise Tax on the Executive's applicable federal income tax return would not
result in the imposition of a negligence or a similar penalty. Any
determination by the Accounting Firm shall be binding upon the Company and
the Executive. As a result of the uncertainty in the application of Section
4999 of the Code at the time of the initial determination by the Accounting
Firm, it is possible that Gross-Up Payments which will not have been made by
the Company should have been made ("Underpayment"). In the event that the
Company exhausts its remedies pursuant to paragraph 5(c), and the Executive
is thereafter required to make a payment of Excise Tax, the Accounting Firm
shall promptly determine the amount of the
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Underpayment that has occurred and any such Underpayment shall be paid by the
Company to the Executive within 5 days after such determination.
(c) CONTEST. The Executive shall notify the Company in writing of
any claim made by the Internal Revenue Service that, if successful, would
require the Company to pay a Gross-Up Payment. Such notification shall be
given as soon as practicable but no later than 10 business days after the
Executive knows of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which the Executive gives such notice to the Company (or
such shorter period ending on the date that any payment of taxes with respect
to such claim is due). If the Company notifies the Executive in writing prior
to the expiration of such period that it desires to contest such claim, the
Employee shall:
(i) give the Company any information reasonably requested by
the Company relating to such claim;
(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time, without
limitation, accepting legal representation with respect to such claim by an
attorney selected by the Company and reasonably acceptable to the Executive;
(iii) cooperate with the Company in good faith in order to
effectively contest such claim;
(iv) permit the Company to participate in any proceedings
relating to such claim, provided that the Company shall bear and pay directly
all costs and expenses (including additional interest and penalties) incurred
in connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax, including
interest and penalties with respect thereto, imposed as a result of such
representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this paragraph 5(c), the Company shall control all
proceedings taken in connection with such contest. At its sole option, the
Company may pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim and
may either direct the Executive to pay the tax claimed and xxx for a refund or
contest the claim in any permissible manner. The Executive agrees to prosecute
such contest to a determination before any administrative tribunal, in a court
of initial jurisdiction and in one or more appellate courts, as the Company
shall determine, provided that if the Company directs the Executive to pay such
claim and xxx for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis, from any Excise Tax or
income tax, including interest or penalties with respect thereto, imposed with
respect to such advance or with respect to any imputed income with respect to
such advance, and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the Executive
with respect to which such contested amount is claimed to be due is limited
solely to such contested
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amount. Furthermore, the Company's control of the contest shall be limited
to issues with respect to which a Gross-Up Payment would be payable
hereunder, and the Executive shall be entitled to settle or contest, as the
case may be, any other issue raised by the Internal Revenue Service or any
other taxing authority.
(d) REFUND. If, after the receipt by the Executive of an amount
advanced by the Company pursuant to paragraph 5(c), the Executive becomes
entitled to receive any refund with respect to such claim, the Executive shall
(subject to the Company's complying with the requirements of paragraph 5(c))
promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If, after
the receipt by the Executive of an amount advanced by the Company pursuant to
paragraph 5(c), a determination is made that the Executive shall not be
entitled to any refund with respect to such claim and the Company does not
notify the Executive in writing of its intent to contest such denial of refund
prior to the expiration of 30 days after such determination, then such advance
shall be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
6. BENEFITS IN LIEU OF SEVERANCE PAY POLICY. The severance benefits
provided for in paragraphs 3, 4 and 5 hereof are in lieu of any benefits that
would otherwise be provided to the Executive under the Company's severance pay
policy or agreement, and the Executive shall not be entitled to any benefits
under any other Company's severance pay policy or agreement.
7. NO FUNDING OF SEVERANCE. Nothing contained in this Agreement or
otherwise shall require the Company to segregate, earmark or otherwise set
aside any funds or other assets to provide for any payments required to be made
under paragraphs 3, 4 and 5 hereof, and the rights of the Executive to any
benefits hereunder shall be solely those of a general, unsecured creditor of
the Company.
8. BENEFICIARIES. In the event of the Executive's death, any amount or
benefit payable or distributable to him pursuant to this Agreement shall be
paid to the beneficiary designated by the Executive for such purpose in the
last written instrument received by the Company prior to the Executive's death,
if any, or, if no beneficiary has been designated, to the Executive's estate,
but such designation shall not be deemed to supersede any beneficiary
designation under any benefit plan of the Company. Whenever this Agreement
provides for the written designation of a beneficiary or beneficiaries of the
Executive, the Executive shall have the right to revoke such designation and to
redesignate a beneficiary or beneficiaries by written notice to the Company,
except to the extent, if any, restricted by law.
9. COVENANT TO PROTECT CONFIDENTIAL INFORMATION. The Executive
acknowledges that in connection with the Executive's employment by the Company,
the Executive will be brought into contact with Confidential Information, and
the Executive agrees that:
(a) The Executive will not disclose to any Person or entity any
Confidential Information, either during or after the term of his employment,
except to designated employees
12
of the Company (only as such employees need such information and are
designated by the Company as needing such information), and attorneys,
accountants or other representatives of the Company as may be necessary or
appropriate in the ordinary course of performing the Executive's duties as an
executive of the Company, or otherwise with the Company's express prior
written consent.
(b) The Executive will not disclose or transfer any Confidential
Information to any third party without the express prior written consent of the
Company.
(c) The Executive will deliver to the Company promptly upon
termination of employment, or at any other time that the Company may so
request, all memoranda, notes, records (including electronic data records),
reports and other documents (and all copies thereof) relating to the
Confidential Information which he may then possess or have within his control.
10. TERMINATION OF OBLIGATION OF CONFIDENTIALITY. The confidentiality
obligations imposed by Section 9 of this Agreement shall cease to apply to
Confidential Information after the EARLIEST of the date on which the Executive
provides the Company with written evidence clearly establishing that the
Confidential Information which has been treated by the Company as Confidential
Information: (i) was known to Executive before it was obtained from the
Company; (ii) was publicly available on the date of first receipt from the
Company; (iv) has become generally known in the Company's industry in the
United States through no fault of the Executive; (v) has been disclosed to
Executive free of any obligation of confidentiality by a third party who has
the right to disclose the same and who did not derive the information from the
Company; or (vi) was independently developed by the Executive without the use
of the Confidential Information.
11. WORK PRODUCT. The Executive acknowledges that Work Product belongs
solely to the Company.
(a) At the request of the Company, the Executive shall (i) promptly
and fully inform the Company in writing of Work Product made, created or
conceived during the Executive's employment, (ii) assign (and the Executive
does hereby assign) to the Company all of his ownership in and rights to such
Work Product, and (iii) assist the Company as requested during and after
employment to evidence, perfect and enforce the rights of the Company in and
ownership of such Work Product by promptly executing and delivering to the
Company, the reasonably necessary written instruments and by performing such
other acts as may be necessary, in the opinion of the Company, so as to enable
the Company to obtain and maintain patent, copyright or other intellectual
property rights in such Work Product and so as to vest the entire right and
title thereto in the Company.
(b) Pursuant to the provisions of Minn. Stat. Section 181.78, the
Company hereby notifies the Executive that this Section 11 does not apply to an
invention for which no equipment, supplies, facility or trade secret
information of the Company was used and which was developed entirely on the
Executive's own time, and (i) which does not relate (A) directly to the
13
business of the Company, or (B) to the Company's actual or demonstrably
anticipated research or development, or (ii) which does not result from any
work performed by the Executive for the Company.
12. NONCOMPETITION, NONSOLICITATION AND NONDISPARAGEMENT. The Executive
acknowledges and agrees with the Company that during the course of the
Executive's employment with the Company, the Executive has had and will
continue to have the opportunity to develop relationships with existing
employees, customers and other business associates of the Company, which
relationships constitute goodwill of the Company, and the Executive
acknowledges and agrees that the Company would be irreparably damaged if the
Executive were to take actions that would damage or misappropriate such
goodwill. The Executive accordingly covenants and agrees as follows:
(a) The Executive acknowledges that the Company currently conducts
throughout the United States (the "Territory") the business of direct marketing
merchandise and membership services including without limitation customer
segmentation and modeling (the "Subject Business"). Accordingly, during the
term of the Executive's employment with the Company and (i) prior to a Change
of Control, for a period equal to the longer of one year after the Termination
Date or the balance of the term of this Agreement under paragraph 2(a) as if no
termination of employment occurred but notice of termination of the automatic
extension was given in the event of a voluntary resignation under paragraph
3(e) or a termination by the Company for Cause under paragraph 3(b), or (ii)
after a Change of Control, until the first anniversary of the Termination Date
(the "Noncompete Period"), the Executive shall not, directly or indirectly,
enter into, engage in, assist, give or lend funds to or otherwise finance, be
employed by or consult with, or have a financial or other interest in, any
business which engages in the Subject Business and markets, programs, products
or services similar to those of the Company as of the Termination Date, whether
for or by himself or as an independent contractor, agent, stockholder, partner
or joint venturer for any other Person, provided that the aggregate ownership
by the Executive of no more than two percent of the outstanding equity
securities of any Person, which securities are traded on a national or foreign
securities exchange, quoted on the Nasdaq Stock Market or other automated
quotation system or, in the case of the Company, of no more than twenty-five
percent of the Company's outstanding equity securities shall not be deemed to
be giving or lending funds to, otherwise financing or having a financial
interest in a competitor. In the event that any Person in which the executive
has any financial or other interest directly or indirectly enters into the
Subject Business in the Territory during the Noncompete Period, the Executive
shall divest all of his interest (other than any amount permitted under this
paragraph) in such Person within 30 days after such Person enters into the
Subject Business in the Territory.
(b) The Executive covenants and agrees that during the period
commencing with the date of this Agreement and ending (i) on the third
anniversary of the Termination Date if the Termination Date occurs prior to a
Change in Control, or (ii) on the first anniversary of the Termination Date if
the Termination Date occurs on or after a Change in Control, the Executive will
not, directly or indirectly, either for himself or for any other Person (i)
solicit any employee of the Company to terminate his or her employment with the
Company or employ any
14
such individual during his or her employment with the Company and for a
period of six months after such individual terminates employment with the
Company, (ii) solicit any supplier to the Company as of the Termination Date
to purchase or distribute information, products or services of or on behalf
of the Executive or such other Person that are competitive with the
information, products or services provided by the Company, or (iii) make any
disparaging statements concerning the Company or its officers, directors or
employees to any lessor, lessee, vendor, supplier, customer, distributor,
employee, consultant or other business associate of the Company, as such
relationship relates to the Company's conduct of the Subject Business.
(c) The Executive understands that the foregoing restrictions may
limit the Executive's ability to earn a livelihood in a business similar to the
business of the Company, but the Executive nevertheless believes that the
Executive has received and will receive sufficient consideration and other
benefits as an employee of the Company and as otherwise provided hereunder to
clearly justify such restrictions which, in any event (given the Executive's
education, skills and ability), the Executive does not believe would prevent
him from otherwise earning a living.
13. REMEDIES. In the event of the violation or threatened violation by
the Executive of any of the covenants contained in this Agreement, in addition
to any other remedy available in law or in equity, the Company shall have (i)
the right and remedy of specific enforcement, including injunctive relief, it
being acknowledged and agreed that any such violation or threatened violation
will cause irreparable injury to the Company and that monetary damages will not
provide an adequate remedy, (ii) the right and remedy to terminate forthwith
any payments or benefits required to be made or provided to the Executive
hereunder upon violation by the Executive of any provisions of paragraphs 9, 11
or 12 hereof, but without limiting the Executive's obligations under paragraphs
9, 11 or 12 hereof, provided that all such payments shall be promptly paid over
to the Executive if a court of competent jurisdiction determines that the
Executive did not violate such provisions, (iii) the right and remedy to
require the Executive to account for and pay over to the Company all
compensation, profits, monies, accruals, increments, or other benefits, other
than those payable under this Agreement, derived or received by the Executive
or the entity in competition with the Company as the result of any transactions
constituting a breach of any part of paragraphs 9, 11 or 12 of this Agreement,
and Executive agrees to account for and pay over to the Company such amounts
promptly upon demand therefor, and (iv) the right to any and all damages
available as a matter of law, and costs and expenses incurred by the Company in
pursuing its rights under this Agreement, including reasonable attorneys' fees
and other litigation expenses.
14. ARBITRATION. In the event of a dispute between the Company and the
Executive regarding the entitlement of the Executive to benefits hereunder or
the amount thereof, it is the intention of the parties that the dispute shall
be resolved as expeditiously as possible, consistent with fairness to both
sides. Accordingly, any claim or dispute relating to the entitlement of the
Executive to benefits hereunder or the amount thereof, shall be resolved by
binding private arbitration before three arbitrators. Either party may request
arbitration by written notice to the other party. Within 30 days of receipt of
such notice by the opposing party, each party shall
15
appoint a disinterested arbitrator and the two arbitrators selected thereby
shall appoint a third neutral arbitrator. In the event the two arbitrators
cannot agree upon the third arbitrator within 10 days after their
appointment, then the neutral arbitrator shall be appointed by the Chief
Judge of Hennepin County (Minnesota) District Court. Any arbitration
proceeding conducted hereunder shall be in the City of Minneapolis and shall
follow the procedures set forth in the Rules of Commercial Arbitration of the
American Arbitration Association, and both sides shall cooperate in as
expeditious a resolution of the proceeding as is reasonable under the
circumstances. The arbitration panel shall have the power to enter any
relief it deems fair and just on any claim, including interim and final
equitable relief, along with any procedural order that is reasonable under
the circumstances. Any award rendered by any arbitration panel, or a
majority thereof, may be filed and a judgment obtained in any court having
jurisdiction over the parties unless the relief granted in the award is
delivered within 10 days of the award.
15. SEVERABILITY. Should any covenant, term or condition contained
in this Agreement become or be declared invalid or unenforceable by a court
of competent jurisdiction, the parties agree that the court shall be
requested to judicially modify such unenforceable provision consistent with
the intent of this Agreement so that it shall be enforceable to the fullest
extent possible.
16. APPLICABLE LAW; JURISDICTION. This Agreement shall be
construed, interpreted and enforced according to the statutes, rules of law
and court decisions of the State of Minnesota without regard to conflict of
law provisions. The Executive hereby submits to the jurisdiction of, and
waives any venue objections against, the State of Minnesota and the federal
courts of the United States located in such state in respect of all actions
arising out of or in connection with the interpretation or enforcement of
paragraphs 9, 11 or 12 of this Agreement, and the Executive consents to the
personal jurisdiction of such courts for such purposes.
17. AMENDMENTS; WAIVERS This Agreement may be amended, modified,
superseded or cancelled, and the terms or covenants waived, only by a written
instrument executed by both of the parties hereto or, in the case of a
waiver, by the Company. The failure to require performance of any provision
hereof shall in no manner affect the right at a later time to enforce the
same. No waiver of any term, whether by conduct or otherwise, shall be
deemed to be a further or continuing waiver of any such breach, or a waiver
of the breach of any other term contained in this Agreement.
18. SUCCESSORS. The Company shall require any successor (whether
direct or indirect, by purchase, merger, consolidation, or otherwise) to all
or substantially all of the business and/or assets of the Company, to
expressly assume and agree to perform its obligations under this Agreement in
the same manner and to the same extent that the Company would be required to
perform them if no succession had taken place unless, in the opinion of legal
counsel mutually acceptable to the Company and the Executive, such
obligations have been assumed by the successor as a matter of law. The
Executive's rights under this Agreement shall inure to the benefit of, and
shall be enforceable by, the Executive's legal representative or other
successors in interest, but shall not otherwise be assignable or transferable.
16
19. SURVIVAL. The rights and obligations of the parties pursuant to
this Agreement shall survive the Termination Date to the extent that any
performance is required hereunder after the expiration or termination of such
term.
20. NOTICES. All notices under this Agreement shall be in writing
and shall be deemed effective when delivered in person (in the Company's
case, to its Chief Financial Officer) or 48 hours after deposit thereof in
the U.S. mails, postage prepaid, addressed, in the case of the Executive, to
the Executive's last known address as carried on the personnel records of the
Company and, in the case of the Company, to the corporate headquarters,
attention of the Chief Financial Officer, or to such other address as the
party to be notified may specify by written notice to the other party.
21. CONSTRUCTION. Paragraph headings are for convenience only and
shall not be considered a part of the terms and provisions of the Agreement.
22. TERMINATION OF EMPLOYMENT AGREEMENT. The Employment Agreement
described in Recital A hereto is terminated effective as of the date of this
Agreement.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed as of the day and year first above written.
DAMARK INTERNATIONAL, INC.
By
------------------------------------
Its
------------------------------------
EXECUTIVE
----------------------------------------
Name: Xxxx X. Xxxx
17
EXHIBIT A
CALCULATION OF GROSS-UP PAYMENT
Pursuant to Section 5 of the Change of Control, Confidentiality and
Noncompete Agreement to which this Exhibit A is attached, a gross-up payment
shall be paid to the Executive by the Company within the time period specified
in the Agreement for the amount of excise tax incurred by the Executive as a
result of Internal Revenue Code Section 4999. The following is an example of
the result intended by Section 5 of the Agreement.
Definition of terms:
G= Gross-up payment due,
P= Amount of the parachute payment,
B= Base amount,
R= Aggregate applicable Federal and State (net of Federal benefit)
income tax rate
Example assumptions:
G= X,
P= $800,000,
B= $200,000, and
R= .4
Based upon the assumptions listed, the gross-up payment is calculated as
follows:
G= (.2P - .2B) / (.8-R)
G= [(.2($800,000) - .2($200,000)] / (.8 - .4)
G= ($160,000 - $40,000) / .4
G= $120,000 / .4
G= $300,000
18
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of January 12, 1998, is by and between
DAMARK INTERNATIONAL, INC., a Minnesota corporation (the "Borrower"), the banks
which are signatories hereto (individually, a "Bank" and, collectively, the
"Banks") and U.S. BANK NATIONAL ASSOCIATION (formerly known as First Bank
National Association), a national banking association, one of the Banks, as
agent for the Banks (in such capacity, the "Agent").
RECITALS
A. The Borrower, the Banks and the Agent are parties to that certain
Credit Agreement dated as of March 22, 1996, as amended by the First through
the Third Amendments thereto (as so amended, the "Existing Credit Agreement").
Pursuant to the Existing Credit Agreement the Banks have made a revolving
credit facility available to Borrower, said revolving credit facility being
further evidenced by three separate Promissory Notes of the Borrower in favor
of each Bank, each dated June 23, 1997 (each, an "Existing Note," and
collectively, the "Existing Notes").
B. The obligations of the Borrower to the Banks under the Existing Credit
Agreement and the Existing Notes are secured by, INTER ALIA, (i) a Security
Agreement dated as of March 22, 1996 (the "Existing Security Agreement") from
the Borrower to the Agent for the benefit of the Agent and the Banks, (ii) a
Collateral Assignment of Trademarks dated as of March 22, 1996 (the "Existing
Trademark Assignment") from the Borrower to the Agent for the benefit of the
Agent and the Banks, (iii) a Pledge Agreement dated as of March 22, 1996, as
amended by a First Amendment dated as of August 21, 1996 (as so amended the
"Existing Pledge Agreement") from the Borrower to the Agent for the benefit of
the Agent and the Banks, (iv) a Mortgage, Security Agreement, Assignment of
Leases and Rents and Fixture Financing Statement dated as of March 22, 1996
(the "Existing Mortgage") from the Borrower to the Agent for the benefit of the
Agent and the Banks, (vi) an Indemnification Agreement dated as of March 22,
1996 (the "Existing Indemnification Agreement") from the Borrower in favor of
the Banks and the Agent, (vii) two separate Guaranties (each an "Existing
Guaranty," and collectively, the "Existing Guaranties") executed by Texas
Telemarketing, Inc. and Damark Financial Services, Inc. (each an "Existing
Guarantor," and collectively, the "Existing Guarantors") dated as of March 22,
1996 and August 21, 1996, respectively, in favor of the Banks and the Agent,
and (viii) two separate Security Agreements (each a "Guarantor Security
Agreement," and collectively, the "Existing Guarantor Security Agreements" from
each Existing Guarantor in favor of the Agent for the benefit of the Agent and
the Banks.
C. The parties hereto also desire to amend and restate the Existing
Credit Agreement in its entirety, to cause the Existing Notes to be amended and
restated in the form of new notes, and to make such amendments to the Existing
Security Agreement, the Existing Trademark Assignment, the Existing Pledge
Agreement,
the Existing Mortgage, the Existing Indemnification Agreement, the Existing
Guaranties and the Existing Guarantor Security Agreements as may be necessary
or desirable in connection with the amendment and restatement of the Existing
Credit Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements hereinafter set forth, the parties hereto do hereby
agree as follows:
PART ONE
AMENDMENT AND RESTATEMENT OF
EXISTING CREDIT AGREEMENT
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.1 DEFINED TERMS. As used in this Agreement the following terms
shall have the following respective meanings (and such meanings shall be
equally applicable to both the singular and plural form of the terms defined,
as the context may require):
"ADJUSTED EURODOLLAR RATE": With respect to each Interest Period
applicable to a Eurodollar Rate Advance, the rate determined by dividing the
Eurodollar Rate for such Interest Period by 1.00 minus the Eurodollar Reserve
Percentage.
"ADVANCE": Any portion of the outstanding Loans by a Bank as to which the
Borrower has elected one of the available interest rate options and, if
applicable, an Interest Period. An Advance may be a Eurodollar Rate Advance or
a Base Rate Advance.
"AFFILIATE": When used with reference to any Person, (a) each Person
that, directly or indirectly, controls, is controlled by or is under common
control with, the Person referred to, (b) each Person which beneficially owns
or holds, directly or indirectly, ten percent or more of any class of voting
stock of the Person referred to (or if the Person referred to is not a
corporation, ten percent or more of the equity interest), (c) each Person, ten
percent of more of the voting stock (or if such Person is not a corporation,
ten percent or more of the equity interest) of which is beneficially owned or
held, directly or indirectly, by the Person referred to, and (d) each of such
Person's officers, directors, joint venturers and partners (excluding, however,
officers, directors, joint venturers and partners of Heartland Advisors, Inc.).
The term control (including the terms "controlled by" and "under common control
-2-
with") means the possession, directly, of the power to direct or cause the
direction of the management and policies of the Person in question.
"AGENT": As defined in the opening paragraph hereof.
"AGGREGATE COMMITMENT AMOUNTS": As of any date, the sum of the Commitment
Amounts of all the Banks.
"AGREEMENT": This Credit Agreement, as the same may be amended,
supplemented, restated or otherwise modified from time to time.
"APPLICABLE LENDING OFFICE": For each Bank and for each type of Advance,
the office of such Bank identified pursuant to Section 9.4 or such other
domestic or foreign office of such Bank (or of an Affiliate of such Bank) as
such Bank may specify from time to time to the Agent and the Borrower as the
office by which its Advances of such type are to be made and maintained.
"APPLICABLE MARGIN": With respect to:
(a) Base Rate Advances -- 0%.
(b) Eurodollar Rate Advances -- 1.50%.
"BANK": As defined in the opening paragraph hereof.
"BASE RATE": For any day, a rate per annum equal to the higher of (a) the
Reference Rate for such day and (b) the Federal Funds Rate for such day plus
one-half of one percent (0.5%) per annum. Each change in the interest rate
provided for herein based upon the Base Rate resulting from a change in the
Base Rate shall take effect at the time of such change.
"BASE RATE ADVANCE": An Advance with respect to which the interest rate
is determined by reference to the Base Rate.
"BOARD": The Board of Governors of the Federal Reserve System or any
successor thereto.
"BORROWER": As defined in the opening paragraph hereof.
"BORROWER LOAN DOCUMENTS": This Agreement, the Notes and any of the
Security Documents executed and/or to be executed by the Borrower.
"BORROWING BASE": As determined in accordance with the formula set forth
in Exhibit 1.1-A hereto.
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"BORROWING BASE CERTIFICATE": A certificate in the form of Exhibit 1.1-B
hereto.
"BORROWING BASE DEFICIENCY": At the time of any determination, the
amount, if any, by which Total Outstandings exceed the Borrowing Base.
"BUSINESS DAY": Any day (other than a Saturday, Sunday or legal holiday
in the State of Minnesota) on which national banks are permitted to be open in
Minneapolis, Minnesota.
"CAPITAL EXPENDITURES": For any period, the sum of all amounts that
would, in accordance with GAAP, be included as additions to property, plant and
equipment on a consolidated statement of cash flows for the Borrower during
such period, in respect of (a) the acquisition, construction, improvement,
replacement or betterment of land, buildings, machinery, equipment or of any
other fixed assets or leaseholds, (b) to the extent related to and not included
in (a) above, materials, contract labor (excluding expenditures properly
chargeable to repairs, maintenance or operating expense in accordance with
GAAP), and (c) other capital expenditures and other uses recorded as capital
expenditures or similar terms having substantially the same effect.
"CAPITALIZED LEASE": A lease of (or other agreement conveying the right
to use) real or personal property with respect to which at least a portion of
the rent or other amounts thereon constitute Capitalized Lease Obligations.
"CAPITALIZED LEASE OBLIGATIONS": As to any Person, the obligations of
such Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) real or personal property which obligations are
required to be classified and accounted for as a capital lease on a balance
sheet of such Person under GAAP (including Statement of Financial Accounting
Standards No. 13 of the Financial Accounting Standards Board), and, for
purposes of this Agreement, the amount of such obligations shall be the
capitalized amount thereof, determined in accordance with GAAP (including such
Statement No. 13).
"CHANGE OF CONTROl": The occurrence, after the date hereof, of any of the
following circumstances: (a) the Borrower's stock ceasing to be publicly traded
on a nationally recognized exchange; or (b) any Person or two or more Persons
acting in concert acquiring beneficial ownership (within the meaning of Rule
13d-3 of the Securities and Exchange Commission under the Securities Exchange
Act of 1934), directly or indirectly, of securities of the Borrower (or other
securities convertible into such securities) representing 51% or more of the
combined voting power of all securities of the Borrower entitled to vote in the
election of directors; or (c) the occurrence during any period of twelve
consecutive months, whether commencing before or after the date of a change in
the Board of Directors of the Borrower with
-4-
the result that the Incumbent Members (as defined below) do not constitute a
majority of the Borrower's Board of Directors; or (d) any Person or two or
more Persons acting in concert acquiring by contract or otherwise, or entering
into a contract or arrangement which has resulted in its or their acquisition
of, control over securities of the Borrower (or other securities convertible
into such securities) representing 51% or more of the combined voting power of
all securities of the Borrower entitled to vote in the election of directors.
The term "Incumbent Members" shall mean the members of the Borrower's Board of
Directors on the date immediately preceding the twelve-month period referred
to in clause (c) of the preceding sentence, provided that any person becoming
a director during such twelve-month period whose election or nomination for
election was approved by a majority of the directors who, on the date of such
election or nomination for election, comprised the Incumbent Members shall be
considered one of the Incumbent Members in respect of such twelve-month period.
"CLOSING FEE": As defined in Section 2.16(a).
"CODE": The Internal Revenue Code of 1986, as amended.
"COMMITMENT": With respect to a Bank, the agreement of such Bank to make
Loans to the Borrower and issue or participate in Letters of Credit for the
account of the Borrower in an aggregate principal amount outstanding at any
time not to exceed such Bank's Commitment Amount upon the terms and subject to
the conditions and limitations of this Agreement.
"COMMITMENT AMOUNT": With respect to a Bank, the amount set opposite such
Bank's name on Exhibit 1.1-E hereto as its Commitment Amount, but as the same
may be reduced from time to time pursuant to Section 2.14.
"COMMITMENT ENDING DATE": As defined in Section 2.20.
"COMMITMENT NONUSE FEES": As defined in Section 2.16(b).
"COMMITMENT PERCENTAGE": With respect to any Bank, the percentage
equivalent of a fraction, the numerator of which is the Commitment Amount of
such Bank and the denominator of which is the Aggregate Commitment Amounts.
"CONTINGENT OBLIGATION": With respect to any Person at the time of any
determination, without duplication, any obligation, contingent or otherwise, of
such Person guaranteeing or having the economic effect of guaranteeing any
Indebtedness of any other Person (the "primary obligor") in any manner, whether
directly or otherwise: (a) to purchase or pay (or advance or supply funds for
the purchase or payment of) such Indebtedness or to purchase (or to advance or
supply funds for the purchase of) any direct or indirect security therefor, (b)
to purchase
-5-
property, securities or services for the purpose of assuring the owner of
such Indebtedness of the payment of such Indebtedness, (c) to maintain
working capital, equity capital or other financial statement condition of the
primary obligor so as to enable the primary obligor to pay such Indebtedness
or otherwise to protect the owner thereof against loss in respect thereof, or
(d) entered into for the purpose of assuring in any manner the owner of such
Indebtedness of the payment of such Indebtedness or to protect the owner
against loss in respect thereof; provided, that the term "Contingent
Obligation" shall not include endorsements for collection or deposit, in each
case in the ordinary course of business.
"DEFAULT": Any event which, with the giving of notice (whether such
notice is required under Section 7.1, or under some other provision of this
Agreement, or otherwise) or lapse of time, or both, would constitute an Event
of Default.
"DOCUMENTARY LETTER OF CREDIT": An import or export documentary letter
of credit issued by the Agent for the account of the Borrower pursuant to
this Agreement.
"EBITDA": For any period of determination, the sum of the consolidated
operating income of the Borrower for such period plus depreciation and
amortization deducted in determining such operating income, all as determined
in accordance with GAAP.
"ERISA": The Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE": Any trade or business (whether or not incorporated)
that is a member of a group of which the Borrower is a member and which is
treated as a single employer under Section 414 of the Code.
"EURODOLLAR BUSINESS DAY": A Business Day which is also a day for
trading by and between banks in United States dollar deposits in the
interbank Eurodollar market and a day on which banks are open for business in
New York City.
"EURODOLLAR RATE": With respect to each Interest Period applicable to a
Eurodollar Rate Advance, the offered rate for deposits in United States Dollars
(rounded upwards, if necessary, to the nearest 1/16 of 1%), for delivery of
such deposits on the first day of such Interest Period for the number of days
comprised therein, which appears on the Reuters Screen LIBO page as of 11:00
a.m., London time, two Eurodollar Business Days preceding the first day of such
Interest Period, or the rate determined at such time based on such other
published service of general application as shall be selected by the Agent for
such purpose. If the Reuters Screen LIBO Page or such other service does not
report such rates or such rates do not, in the judgement of the Agent,
accurately reflect the rates of interest applicable to the
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Banks in the relevant markets, the rate for such Interest Period shall be
determined by the Agent based on rates offered to the Agent for United States
Dollar deposits in the interbank Eurodollar Market. "Reuters Screen LIBO
page" means the display designated as page "LIBO" on the Reuters Monitor
Money Rate Screen (or such other page as may replace the LIBO page on such
service) for the purpose of displaying Reuters interbank offered rates of
major banks for United States Dollar deposits.
"EURODOLLAR RATE ADVANCE": An Advance with respect to which the
interest rate is determined by reference to the Adjusted Eurodollar Rate.
"EURODOLLAR RESERVE PERCENTAGE": As of any day, that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board for determining the maximum reserve requirement (including any basic,
supplemental or emergency reserves) for a member bank of the Federal Reserve
System, with deposits comparable in amount to those held by the Agent, in
respect of "Eurocurrency Liabilities" as such term is defined in Regulation D
of the Board. The rate of interest applicable to any outstanding Eurodollar
Rate Advances shall be adjusted automatically on and as of the effective date
of any change in the Eurodollar Reserve Percentage.
"EVENT OF DEFAULT": Any event described in Section 7.1.
"EXISTING CREDIT AGREEMENT": As such term is defined in Recital A.
"EXISTING GUARANTOR" and "EXISTING GUARANTORS": As such terms are
defined in Recital B.
"EXISTING GUARANTOR SECURITY AGREEMENT" and "EXISTING GUARANTOR SECURITY
AGREEMENTS": As such terms are defined in Recital B.
"EXISTING GUARANTY" and "EXISTING GUARANTIES": As such terms are
defined in Recital B.
"EXISTING INDEMNIFICATION AGREEMENT": As such term is defined in
Recital B.
"EXISTING MORTGAGE": As such term is defined in Recital B.
"EXISTING NOTE" and "EXISTING NOTES": As such terms are defined in
Recital A.
"EXISTING PLEDGE AGREEMENT": As such term is defined in Recital B.
"EXISTING SECURITY AGREEMENT": As such term is defined in Recital B.
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"EXISTING TRADEMARK ASSIGNMENT": As such term is defined in Recital B.
"FEDERAL FUNDS RATE": For any day, the rate per annum (rounded upwards,
if necessary, to the nearest 1/100 of 1%) equal to the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next succeeding such
day, PROVIDED that (a) if the day for which such rate is to be determined is
not a Business Day, the Federal Funds Rate for such day shall be such rate on
such transactions on the next preceding Business Day as so published on the
next succeeding Business Day and (b) if such rate is not so published for any
Business Day, the Federal Funds Rate for such Business Day shall be the
average rate charged to U.S. Bank on such Business Day on such transactions
as determined by the Agent.
"FIXED CHARGE COVERAGE RATIO": For any period of determination, the
ratio of
(a) the sum of EBITDA PLUS operating lease expense deducted in
determining EBITDA,
TO
(b) the remainder of Fixed Charges MINUS Capital Expenditures made,
with the prior written consent of the Majority Banks, from equity
capital specifically raised by the Borrower for the purpose of making
such Capital Expenditures,
in each case determined for the Borrower on a consolidated basis for said
period in accordance with GAAP.
"FIXED CHARGES": For any period of determination, the sum of the Net
Interest Expense, Capital Expenditures, operating lease expense and cash
income taxes, in each case determined on a consolidated basis for said period
in accordance with GAAP.
"GAAP": Generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment
of the accounting profession, which are applicable to the circumstances as of
any date of determination.
"GUARANTOR MORTGAGE": A mortgage in substantially the same form as the
Mortgage, executed and delivered by a Guarantor in accordance with Section
6.21.
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"GUARANTOR PLEDGE AGREEMENT": A pledge agreement in substantially the
same form as the Pledge Agreement, executed and delivered by a Guarantor in
accordance with Section 6.21.
"GUARANTORS": The Existing Guarantors and any other Subsidiary that
becomes a Guarantor hereunder in accordance with Section 6.21.
"GUARANTOR SECURITY AGREEMENT": With respect to either of the Existing
Guarantors, such Existing Guarantor's Existing Guarantor Security Agreement,
and with respect to any other Guarantor, a security agreement in
substantially the same form as the Security Agreement.
"GUARANTY": With respect to either of the Existing Guarantors, such
Existing Guarantor's Existing Guaranty, and with respect to any other
Guarantor, a guaranty in the form of Exhibit 1.1-D attached hereto.
"HOLDING ACCOUNT": A deposit account belonging to the Agent for the
benefit of the Banks into which the Borrower may be required upon the
occurrence of an Event of Default, or may elect, to make deposits pursuant to
the provisions of this Agreement, such account to be under the sole dominion
and control of the Agent and not subject to withdrawal by the Borrower, with
any amounts therein to be held for application toward payment of any
outstanding Letters of Credit when drawn upon. The Holding Account shall be
a money market savings account or substantial equivalent (or other
appropriate investment medium as the Borrower may from time to time request
and to which the Agent in its sole discretion shall have consented) and shall
bear interest in accordance with the terms of similar accounts held by the
Agent for its customers.
"IMMEDIATELY AVAILABLE FUNDS": Federal funds or other immediately
available funds.
"INDEBTEDNESS": With respect to any Person at the time of any
determination, without duplication, all obligations, contingent or otherwise,
of such Person which in accordance with GAAP should be classified upon the
balance sheet of such Person as liabilities, but in any event including: (a)
all obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (c)
all obligations of such Person upon which interest charges are customarily paid
or accrued, (d) all obligations of such Person under conditional sale or other
title retention agreements relating to property purchased by such Person, (e)
all obligations of such Person issued or assumed as the deferred purchase price
of property or services, (f) all obligations of others secured by any Lien on
property owned or acquired by such Person, whether or not the obligations
secured thereby have been assumed, (g) all Capitalized Lease Obligations of
such Person, (h) all obligations of such Person in respect of interest rate
protection
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agreements, (i) all obligations of such Person, actual or contingent, as an
account party in respect of letters of credit or bankers' acceptances, (j)
all obligations of any partnership or joint venture as to which such Person
is or may become personally liable, and (k) all Contingent Obligations of
such Person.
"INDEMNIFICATION AGREEMENT": The Existing Indemnification Agreement, as
the same may be amended, supplemented, restated or otherwise modified from
time to time.
"INTEREST PERIOD": With respect to each Eurodollar Rate Advance, the
period commencing on the date of such Advance or on the last day of the
immediately preceding Interest Period, if any, applicable to an outstanding
Advance and ending one, two, three or six months thereafter, as the Borrower
may elect in the applicable notice of borrowing, continuation or conversion;
PROVIDED THAT:
(a) Any Interest Period that would otherwise end on a day which is
not a Eurodollar Business Day shall be extended to the next succeeding
Eurodollar Business Day unless such Eurodollar Business Day falls in
another calendar month, in which case such Interest Period shall end on
the next preceding Eurodollar Business Day;
(b) Any three-months or six- months Interest Period that begins on
the last Eurodollar Business Day of a calendar quarter (or a day for which
there is no numerically corresponding day in the calendar quarter at the
end of such Interest Period) shall end on the last Eurodollar Business Day
of a calendar quarter; and
(c) Any Interest Period that would otherwise end after the
Commitment Ending Date shall end on the Commitment Ending Date.
"INVESTMENT": The acquisition, purchase, making or holding of any stock
or other security, any loan, advance, contribution to capital, extension of
credit (except for trade and customer accounts receivable for inventory sold,
membership and other fees, or services rendered in the ordinary course of
business and payable in accordance with customary trade terms), any
acquisitions of real or personal property (other than real and personal
property acquired in the ordinary course of business) and any purchase or
commitment or option to purchase stock or other debt or equity securities of
or any interest in another Person or any integral part of any business or the
assets comprising such business or part thereof. The amount of any
Investment shall be the original cost of such Investment plus the cost of all
additions thereto, without any adjustments for increases or decreases in
value, or write-ups, write-downs or write-offs with respect to such
Investment.
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"LETTER OF CREDIT": A Documentary Letter of Credit or a Standby Letter
of Credit.
"LIEN": With respect to any Person, any security interest, mortgage,
pledge, lien, charge, encumbrance, title retention agreement or analogous
instrument or device (including the interest of each lessor under any
Capitalized Lease but excluding the interest of the lessor under any
operating lease which is considered a true lease and not a security interest
under the Uniform Commercial Code and excluding the interest of the licensor
under any license which is considered a true license and not a security
interest under the Uniform Commercial Code), in, of or on any assets or
properties of such Person, now owned or hereafter acquired, whether arising
by agreement or operation of law.
"LOAN": As defined in Section 2.1.
"LOAN DATE": The date of the making of any Loans hereunder.
"LOAN DOCUMENTS": This Agreement, the Notes and the Security Documents.
"MAJORITY BANKS": At any time, Banks holding at least 66-2/3% of the
Aggregate Commitment Amounts; provided, that if the commitments have
terminated, the term "Majority Banks" shall mean Banks holding at least
66-2/3% of Total Outstandings (including Banks holding participation
interests in Unpaid Drawings pursuant to the participation agreements
referred to in the last sentence of Section 2.15).
"MORTGAGE": The Existing Mortgage, as the same may be amended,
supplemented, restated or otherwise modified from time to time.
"MULTIEMPLOYER PLAN": A multiemployer plan, as such term is defined in
Section 4001 (a) (3) of ERISA, which is maintained (on the date of this
Agreement, within the five years preceding the date of this Agreement, or at
any time after the date of this Agreement) for employees of the Borrower or
any ERISA Affiliate.
"NET INTEREST EXPENSE": For any period of determination, the remainder
of (a) the consolidated interest expense of the Borrower for such period
MINUS (b) the consolidated interest income of the Borrower for such period;
PROVIDED, HOWEVER, that Net Interest Expense for any period shall not be less
than zero.
"NOTE": A promissory note of the Borrower in the form of Exhibit 1.1-C
hereto.
"OBLIGATIONS": The Borrower's obligations in respect of the due and
punctual payment of principal and interest on the Notes and Unpaid Drawings
when and as
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due, whether by acceleration or otherwise and all fees (including Commitment
Nonuse Fees and fees payable to the Agent for its own account as described in
the last sentence of Section 2.17), expenses, indemnities, reimbursements and
other obligations of the Borrower under this Agreement or any other Borrower
Loan Document, in all cases whether now existing or hereafter arising or
incurred.
"PBGC": The Pension Benefit Guaranty Corporation, established pursuant
to Subtitle A of Title IV of ERISA, and any successor thereto or to the
functions thereof.
"PERSON": Any natural person, corporation, partnership, limited
partnership, limited liability company, joint venture, firm, association,
trust, unincorporated organization, government or governmental agency or
political subdivision or any other entity, whether acting in an individual,
fiduciary or other capacity.
"PLAN": Each employee benefit plan (whether in existence on the date
of this Agreement or thereafter instituted), as such term is defined in
Section 3 of ERISA, maintained for the benefit of employees, officers or
directors of the Borrower or of any ERISA Affiliate.
"PLEDGE AGREEMENT": The Existing Pledge Agreement, as the same may be
amended, supplemented, restated or otherwise modified from time to time.
"PROHIBITED TRANSACTION": The respective meanings assigned to such term
in Section 4975 of the Code and Section 406 of ERISA.
"REFERENCE RATE": The rate of interest from time to time publicly
announced by the Agent as its "reference rate." The Agent may lend to its
customers at rates that are at, above or below the Reference Rate. For
purposes of determining any interest rate hereunder or under any other Loan
Document which is based on the Reference Rate, such interest rate shall
change as and when the Reference Rate shall change.
"REGULATORY CHANGE": Any change after the date of this Agreement in
federal, state or foreign laws or regulations or the adoption or making after
such date of any interpretations, directives or requests applying to a class
of banks including any Bank under any federal, state or foreign laws or
regulations (whether or not having the force of law) by any court or
governmental or monetary authority charged with the interpretation or
administration thereof.
"REPORTABLE EVENT": A reportable event as defined in Section 4043 of
ERISA and the regulations issued under such Section, with respect to a Plan,
excluding, however, such events as to which the PBGC by regulation has waived
the requirement of Section 4043(a) of ERISA that it be notified within 30
days of the
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occurrence of such event, PROVIDED that a failure to meet the minimum funding
standard of Section 412 of the Code and of Section 302 of ERISA shall be a
Reportable Event regardless of the issuance of any waiver in accordance with
Section 412(d) of the Code.
"RESPONSIBLE OFFICER": The chief executive officer, the chief financial
officer and any other officer of the Borrower to whom the Borrower has given
responsibility for determining or monitoring the Borrower's compliance with
the provisions of this Agreement.
"RESTRICTED PAYMENTS": With respect to the Borrower, collectively, all
dividends or other distributions of any nature (cash, securities other than
common stock of the Borrower, assets or otherwise) and all payments on any
class of equity securities (including warrants, options or rights therefor)
issued by the Borrower, whether such securities are authorized or outstanding
on the date of this Agreement or at any time thereafter and any redemption or
purchase of, or distribution in respect of, any of the foregoing, whether
directly or indirectly.
"SECURITY AGREEMENT": The Existing Security Agreement, as the same may
be amended, supplemented, restated or otherwise modified from time to time.
"SECURITY DOCUMENTS": The Mortgage, the Indemnification Agreement, the
Security Agreement, the Pledge Agreement, any Guaranties, any Guarantor
Mortgages, any Guarantor Security Agreements and any Uniform Commercial Code
financing statements filed with respect to any thereof.
"STANDBY LETTER OF CREDIT": A Standby Letter of Credit issued by the
Agent for the account of the Borrower pursuant to this Agreement.
"STANDBY LETTER OF CREDIT FEE": As defined in Section 2.17.
"SUBORDINATED DEBT": Any Indebtedness of the Borrower, now existing or
hereafter created, incurred or arising, which is subordinated in right of
payment to the payment of the Obligations in a manner and to an extent (a)
that Majority Banks have approved in writing prior to the creation of such
Indebtedness, or (b) as to any Indebtedness of the Borrower existing on the
date of this Agreement, that Majority Banks have approved as Subordinated
Debt in a writing delivered by Majority Banks to the Borrower on or prior to
the date of this Agreement.
"SUBSIDIARY": Any corporation or other entity of which securities or
other ownership interests having ordinary voting power for the election of a
majority of the board of directors or other Persons performing similar
functions are owned by the Borrower either directly or through one or more
Subsidiaries.
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"TANGIBLE NET WORTH": As of any date of determination, the remainder
of the consolidated net worth of the Borrower as determined in accordance
with GAAP, LESS the net book value of all intangible assets of the Borrower
and its Subsidiaries, including all such items as goodwill, trademarks, trade
names, service marks, copyrights, patents, licenses, unamortized debt
discount and expenses and the excess of the purchase price of the assets of
any business acquired by the Borrower or any of its Subsidiaries over the
book value of such assets.
"TERMINATION DATE": The earliest of (a) the Commitment Ending Date, (b)
the date on which the Commitments are terminated pursuant to Section 7.2
hereof or (c) the date on which the Commitment Amounts are reduced to zero
pursuant to Section 2.14 hereof.
"TOTAL FUNDED DEBT": As of any date of determination, the total amount,
on a consolidated basis, of Indebtedness of the Borrower and its Subsidiaries
described in clauses (a), (b), (c) and (g) of the definition of the term
"Indebtedness" set forth in this Section 1.1, including the maximum amount
available to be drawn under Standby Letters of Credit but excluding any
amounts available to be drawn under Documentary Letters of Credit.
"TOTAL OUTSTANDINGS": As of any date of determination, the sum of (a)
the aggregate unpaid principal balance of Loans outstanding on such date, (b)
the aggregate maximum amount available to be drawn under Letters of Credit
outstanding on such date and (c) the aggregate amount of Unpaid Drawings on
such date.
"UNPAID DRAWING": As defined in Section 2.11.
"UNUSED COMMITMENT": With respect to any Bank as of any date of
determination, the remainder of
(a) such Bank's Commitment Amount, MINUS
(b) an amount equal to the product of
(i) the remainder of (A) the Total Outstandings on such date
MINUS (B) the aggregate maximum amount available to be drawn under
Documentary Letters of Credit outstanding on such date, MULTIPLIED BY
(ii) such Bank's Commitment Percentage.
"U.S. BANK": U.S. Bank National Association (formerly known as First Bank
National Association) in its capacity as one of the Banks hereunder.
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Section 1.2 ACCOUNTING TERMS AND CALCULATIONS. Except as may be
expressly provided to the contrary herein, all accounting terms used herein
shall be interpreted and all accounting determinations hereunder shall be
made in accordance with GAAP. To the extent any change in GAAP affects any
computation or determination required to be made pursuant to this Agreement,
such computation or determination shall be made as if such change in GAAP had
not occurred unless the Borrower and Majority Banks agree in writing on an
adjustment to such computation or determination to account for such change in
GAAP.
Section 1.3 COMPUTATION OF TIME PERIODS. In this Agreement, in the
computation of a period of time from a specified date to a later specified
date, unless otherwise stated the word "from" means "from and including" and
the word "to" or "until" each means "to but excluding". All references in
Sections 6.16, 6.17, 6.18 and 6.19 to any March 31, June30 or September 30
date shall be deemed to mean and refer to the last day of the Borrower's
fiscal quarter ending nearest to such date.
Section 1.4 OTHER DEFINITIONAL TERMS. The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of
this Agreement. References to Sections, Exhibits, schedules and like
references are to this Agreement unless otherwise expressly provided. The
words "include", "includes" and "including" shall be deemed to be followed by
the phrase "without limitation". Unless the context in which used herein
otherwise clearly requires, "or" has the inclusive meaning represented by the
phrase "and/or".
ARTICLE II
TERMS OF THE CREDIT FACILITIES
PART A -- TERMS OF LENDING
Section 2.1 THE COMMITMENTS. On the terms and subject to the
conditions hereof, each Bank severally agrees to make loans (each, a "Loan"
and, collectively, the "Loans") to the Borrower on a revolving basis at any
time and from time to time from the date of this Agreement to the Termination
Date, during which period the Borrower may borrow, repay and reborrow in
accordance with the provisions hereof, provided, that no Loan will be made in
any amount which, after giving effect thereto, would cause the Total
Outstandings to exceed the lesser of (a) the Aggregate Commitment Amounts or
(b) the Borrowing Base as reflected in the most recent Borrowing Base
Certificate received by the Agent. Without limiting the Borrower's
obligation under Section 5.1(f) to provide monthly Borrowing Base
Certificates to the Agent, the Borrower may provide a Borrowing Base
Certificate to
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the Agent at any time. Loans hereunder shall be made by the several Banks
ratably in the proportion of their respective Commitment Amounts. Loans may
be obtained and maintained, at the election of the Borrower but subject to
the limitations hereof, as Base Rate Advances or Eurodollar Rate Advances or
any combination thereof; provided, however, that the Loans made by any Bank
shall not consist of more than ten (10) outstanding Eurodollar Rate Advances
at any time.
Section 2.2 PROCEDURE FOR LOANS. Any request by the Borrower for Loans
hereunder shall be in writing or by telephone and must be given so as to be
received by the Agent not later than 12:00 noon (Minneapolis time) three
Eurodollar Business Days prior to the requested Loan Date if the Loans are
requested as Eurodollar Rate Advances and not later than 12:00 noon
(Minneapolis time) on the requested Loan Date if the Loans are requested as
Base Rate Advances. Each request for Loans hereunder shall be irrevocable
and shall be deemed a representation by the Borrower that on the requested
Loan Date and after giving effect to the requested Loans the applicable
conditions specified in Article III have been and will be satisfied. Each
request for Loans hereunder shall specify (i) the requested Loan Date, (ii)
the aggregate amount of Loans to be made on such date which shall be in a
minimum amount of (A) $100,000 or, if more, an integral multiple thereof, if
such Loans are to be funded as Base Rate Advances, or (B) $500,000 or, if
more, an integral multiple of $100,000 in excess thereof, if such Loans are
to be funded as Eurodollar Rate Advances, (iii) whether such Loans are to be
funded as Base Rate Advances or Eurodollar Rate Advances and (iv) in the case
of Eurodollar Rate Advances, the duration of the initial Interest Period
applicable thereto. The Agent may rely on any telephone request for Loans
hereunder which it believes in good faith to be genuine; and the Borrower
hereby waives the right to dispute the Agent's record of the terms of such
telephone request. The Agent shall promptly notify each other Bank of the
receipt of such request, the matters specified therein, and of such Bank's
ratable share of the requested Loans. On the date of the requested Loans,
each Bank shall provide its share of the requested Loans to the Agent in
Immediately Available Funds not later than 3:00 p.m., Minneapolis time.
Unless the Agent determines that any applicable condition specified in
Article III has not been satisfied, the Agent will make available to the
Borrower at the Agent's principal office in Minneapolis, Minnesota in
Immediately Available Funds not later than 4:00 p.m. (Minneapolis time) on
the requested Loan Date the amount of the requested Loans. If the Agent has
made a Loan to the Borrower on behalf of a Bank but has not received the
amount of such Loan from such Bank by the time herein required, such Bank
shall pay interest to the Agent on the amount so advanced at the Federal
Funds Rate from the date of such Loan to the date funds are received by the
Agent from such Bank, such interest to be payable with such remittance from
such Bank of the principal amount of such Loan (provided, however, that the
Agent shall not make any Loan on behalf of a Bank if the Agent has received
prior notice from such Bank that it will not make such Loan). If the Agent
does not receive payment from such Bank by the next Business Day after the
date of any Loan, the Agent shall be entitled
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to recover such Loan, with interest thereon at the rate then applicable to
the such Loan, on demand, from the Borrower, without prejudice to the Agent's
and the Borrower's rights against such Bank. If such Bank pays the Agent the
amount herein required with interest at the Federal Funds Rate before the
Agent has recovered from the Borrower, such Bank shall be entitled to the
interest payable by the Borrower with respect to the Loan in question
accruing from the date the Agent made such Loan.
Section 2.3 NOTES. The Advances of each Bank shall be evidenced by a
single Note payable to the order of such Bank in a principal amount equal to
such Bank's Commitment Amount originally in effect. Upon receipt of each Bank's
Note from the Borrower, the Agent shall mail such Note to such Bank. Each Bank
shall enter in its ledgers and records the amount of each Loan, the various
Advances made, converted or continued and the payments made thereon, and each
Bank is authorized by the Borrower to enter on a schedule attached to its Note
a record of such Loans, Advances and payments; provided, however, that the
failure by any Bank to make any such entry or any error in making such entry
shall not limit or otherwise affect the obligation of the Borrower hereunder
and on the Notes, and, in all events, the principal amounts owing by the
Borrower in respect of the Notes shall be the aggregate amount of all Loans
made by the Banks less all payments of principal thereof made by the Borrower.
Section 2.4 CONVERSIONS AND CONTINUATIONS. On the terms and subject to
the limitations hereof, the Borrower shall have the option at any time and
from time to time to convert all or any portion of the Advances into Base
Rate Advances or Eurodollar Rate Advances, or to continue a Eurodollar Rate
Advance as such; provided, however, that a Eurodollar Rate Advance may be
converted or continued only on the last day of the Interest Period applicable
thereto and no Advance may be converted to or continued as a Eurodollar Rate
Advance if a Default or Event of Default has occurred and is continuing on
the proposed date of continuation or conversion. Advances may be converted
to, or continued as, Eurodollar Rate Advances only in the minimum amount, as
to the aggregate amount of the Advances of all Banks so converted or
continued, of $500,000 or, if more, an integral multiple of $100,000 in
excess thereof. The Borrower shall give the Agent written notice of any
continuation or conversion of any Advances and such notice must be given so
as to be received by the Agent not later than 12:00 noon (Minneapolis time)
three Eurodollar Business Days prior to requested date of conversion or
continuation in the case of the continuation of, or conversion to, Eurodollar
Rate Advances and on the date of the requested conversion to Base Rate
Advances. Each such notice shall specify (a) the amount to be continued or
converted, (b) the date for the continuation or conversion (which must be (i)
the last day of the preceding Interest Period for any continuation or
conversion of Eurodollar Rate Advances, and (ii) a Eurodollar Business Day in
the case of continuations as or conversions to Eurodollar Rate Advances and a
Business Day in the case of conversions to Base
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Rate Advances), and (c) in the case of conversions to or continuations as
Eurodollar Rate Advances, the Interest Period applicable thereto. Any notice
given by the Borrower under this Section shall be irrevocable. If the Borrower
shall fail to notify the Agent of the continuation of any Eurodollar Rate
Advances within the time required by this Section, such Advances shall, on the
alst day of the Interest Period applicable thereto, automatically be converted
into Base Rate Advances of the same principal amount. All conversions and
continuation of Advances must be made uniformly and ratably among the Banks.
Section 2.5 INTEREST RATES, INTEREST PAYMENTS AND DEFAULT INTEREST.
Interest shall accrue and be payable on the Loans as follows:
(a) Subject to paragraph (c) below, each Eurodollar Rate Advance
shall bear interest on the unpaid principal amount thereof during the
Interest Period applicable thereto at a rate per annum equal to the sum of
(i) the Adjusted Eurodollar Rate for such Interest Period, plus (ii) the
Applicable Margin.
(b) Subject to paragraph (c) below, each Base Rate Advance shall
bear interest on the unpaid principal amount thereof at a varying rate per
annum equal to the sum of (i) the Base Rate, plus (ii) the Applicable
Margin.
(c) Any Advance not paid when due, whether at the date scheduled
therefor or earlier upon acceleration, shall bear interest until paid in
full (i) during the balance of any Interest Period applicable to such
Advance, at a rate per annum equal to the sum of the rate applicable to
such Advance during such Interest Period plus 2.0%, and (ii) otherwise, at
a rate per annum equal to the sum of (1) the Base Rate, plus (2) the
Applicable Margin for Base Rate Advances, plus (3) 2.0%.
(d) Interest shall be payable (i) with respect to each Eurodollar
Rate Advance having an Interest Period of three months or less, on the
last day of the Interest Period applicable thereto; (ii) with respect to
any Eurodollar Rate Advance having an Interest Period greater than three
months, on the last day of the Interest Period applicable thereto and on
each day that would have been the last day of the Interest Period for such
Advance had successive Interest Periods of three months duration been
applicable to such Advance; (iii) with respect to any Base Rate Advance,
on the last day of each calendar quarter; (iv) with respect to all
Advances, upon any permitted prepayment (on the amount prepaid); and (v)
with respect to all Advances, on the Termination Date; provided that
interest under Section 2.5(c) shall be payable on demand.
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Section 2.6 REPAYMENT. The unpaid principal amount of all Advances,
together with all accrued and unpaid interest thereon, shall be due and payable
on the Termination Date.
Section 2.7 PREPAYMENTS.
2.7(a) MANDATORY PAYMENTS. If at any time a Borrowing Base
Deficiency exists, the Borrower shall immediately pay on the principal of
the Advances an amount equal to such Borrowing Base Deficiency. Any such
payments shall be applied first against Base Rate Advances and then to
Eurodollar Rate Advances in order starting with the Eurodollar Rate
Advances having the shortest time to the end of the applicable Interest
Period. Amounts paid on the Advances under this paragraph (a) shall be
for the account of each Bank in proportion to its share of outstanding
Loans. If, after paying all outstanding Advances, a Borrowing Base
Deficiency still exists, the Borrower shall pay into the Holding Account
an amount equal to the amount of the remaining Borrowing Base Deficiency.
2.7(b) OPTIONAL PREPAYMENTS. The Borrower may prepay Base Rate
Advances, in whole or in part, at any time, without premium or penalty.
Each partial prepayment shall be in an aggregate amount for all the Banks
of $100,000 or an integral multiple thereof. Except upon an acceleration
following an Event of Default or upon termination of the Commitments in
whole, the Borrower may pay Eurodollar Rate Advances only on the last day
of the Interest Period applicable thereto. Amounts paid (unless following
an acceleration or upon termination of the Commitments in whole) or
prepaid on Advances under this paragraph (b) may be reborrowed upon the
terms and subject to the conditions and limitations of this Agreement.
Amounts paid or prepaid on the Advances under this paragraph (b) shall be
for the account of each Bank in proportion to its share of outstanding
Loans.
PART B -- TERMS OF THE LETTER OF CREDIT FACILITIES
Section 2.8 LETTERS OF CREDIT. Upon the terms and subject to the
conditions of this Agreement, the Agent agrees to issue Letters of Credit for
the account of the Borrower from time to time between the date of this
Agreement and the Termination Date in such amounts as the Borrower shall
request up to an aggregate amount at any time outstanding not exceeding the
Aggregate Commitment Amounts; provided that no Letter of Credit will be issued
in any amount which, after giving effect to such issuance, would cause Total
Outstandings to exceed the lesser of (a) the Aggregate Commitment Amounts or
(b) the Borrowing Base as reflected in the most recent Borrowing Base
Certificate received by the Agent.
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Section 2.9 PROCEDURES FOR LETTERS OF CREDIT. Each request for a Letter
of Credit shall be made by the Borrower in writing, by telex, facsimile
transmission or electronic conveyance received by the Agent by (a) 2:00 p.m.,
Minneapolis time, on a Business Day which is not less than two Business Days
preceding the requested date of issuance (which shall also be a Business Day),
in the case of a Standby Letter of Credit, and (b) 2:30 p.m., Minneapolis time,
on a Business Day which is not less than one Business Day preceding the
requested date of issuance (which shall also be a Business Day), in the case of
a Documentary Letter of Credit. Each request for a Letter of Credit shall be
deemed a representation by the Borrower that on the date of issuance of such
Letter of Credit and after giving effect thereto the applicable conditions
specified in Article III have been and will be satisfied. The Agent may
require that the Borrower execute its standard forms of application and
continuing agreement in connection with the issuance of Letters of Credit,
along with satisfactory evidence of the authority and incumbency of the
officials of the Borrower making such request. The Agent shall send notice to
the other Banks weekly, stating the amounts and identification numbers of the
Letters of Credit issued during each week.
Section 2.10 TERMS OF LETTERS OF CREDIT. Letters of Credit shall be
issued in support of obligations of the Borrower incurred for general corporate
purposes. All Letters of Credit must expire not later than the 180th day
following the Commitment Ending Date, provided that the Borrower shall, by not
later than the date which is two Business Days prior to the Commitment Ending
Date, or by such earlier date as the Agent may determine in its discretion,
deposit in the Holding Account, in Immediately Available Funds, an amount which
is at least equal to the total amount available to be drawn under such Letter
of Credit, which amount shall be held by the Agent in the Holding Account as
security for the reimbursement by the Borrower of any drawings under such
Letter of Credit.
Section 2.11 AGREEMENT TO REPAY LETTER OF CREDIT DRAWINGS. If the
Agent has received documents purporting to draw under a Letter of Credit that
the Agent believes conform to the requirements of the Letter of Credit, or if
the Agent has decided that it will comply with the Borrower's written or oral
request or authorization to pay a drawing on any Letter of Credit that the
Agent does not believe conforms to the requirements of the Letter of Credit,
it will notify the Borrower of that fact. The Borrower shall reimburse the
Agent by 11:30 a.m. (Minneapolis time) on the day on which such drawing is to
be paid in Immediately Available Funds in an amount equal to the amount of
such drawing. Any amount by which the Borrower has failed to reimburse the
Agent for the full amount of such drawing by 12:00 noon (Minneapolis time) on
the date on which the Agent in its notice indicated that it would pay such
drawing is an "Unpaid Drawing." All Unpaid Drawings not reimbursed on the
date on which such drawing is paid, whether by the Borrower or from the
proceeds of Loans made pursuant to Section 2.15 or from funds available in
the Holding Account, shall bear interest until paid in
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full at the rate per annum equal to the sum of (1) the Base Rate, plus (2)
the Applicable Margin for Base Rate Advances, plus (3) 2%.
Section 2.12 OBLIGATIONS ABSOLUTE. The obligation of the Borrower
under Section 2.11 to repay the Agent for any amount drawn on any Letter of
Credit and to repay the Banks for any Loans made under Section 2.15 to cover
Unpaid Drawings shall be absolute, unconditional and irrevocable, shall
continue for so long as any Letter of Credit is outstanding notwithstanding
any termination of this Agreement, and shall be paid strictly in accordance
with the terms of this Agreement, under all circumstances whatsoever,
including without limitation the following circumstances:
(a) Any lack of validity or enforceability of any Letter of Credit;
(b) The existence of any claim, setoff, defense or other right which
the Borrower may have or claim at any time against any beneficiary,
transferee or holder of any Letter of Credit (or any Person for whom any
such beneficiary, transferee or holder may be acting), the Agent or any
Bank or any other Person, whether in connection with a Letter of Credit,
this Agreement, the transactions contemplated hereby, or any unrelated
transaction; or
(c) Any statement or any other document presented under any Letter
of Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect
whatsoever.
Neither the Agent nor any Bank nor officers, directors or employees of any
thereof shall be liable or responsible for, and the obligations of the
Borrower to the Agent and the Banks shall not be impaired by:
(i) The use which may be made of any Letter of Credit or for
any acts or omissions of any beneficiary, transferee or holder
thereof in connection therewith;
(ii) The validity, sufficiency or genuineness of documents, or
of any endorsements thereon, even if such documents or endorsements
should, in fact, prove to be in any or all respects invalid,
insufficient, fraudulent or forged;
(iii) The acceptance by the Agent of documents that appear on
their face to be in order, without responsibility for further
investigation, regardless of any notice or information to the
contrary; or
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(iv) Any other action of the Agent in making or failing to make
payment under any Letter of Credit if in good faith.
Section 2.13 INCREASED COST FOR LETTERS OF CREDIT. If any Regulatory
Change shall either (a) impose, modify or make applicable any reserve,
deposit, capital adequacy or similar requirement against Letters of Credit
issued by the Agent or any Bank's obligation to make Loans to cover Unpaid
Drawings, or (b) shall impose on any Bank any other conditions affecting this
Agreement or any Letter of Credit; and the result of any of the foregoing is
to increase the cost to the Agent or any Bank of issuing or maintaining any
Letter of Credit or such Bank's obligation to make Loans to cover Unpaid
Drawings, or reduce the amount of any sum received or receivable by the Agent
or any Bank hereunder, then, upon demand (which demand shall be given by the
Agent or Bank affected by such increased cost or reduction promptly after it
determines such increased cost or reduction) to the Borrower by the Agent or
such Bank, the Borrower shall pay to the Agent or such Bank the additional
amount or amounts as will compensate the Agent or such Bank for such
increased cost or reduction. The Agent and each Bank will promptly notify
the Borrower, and each Bank other than U.S. Bank will promptly notify the
Agent, of any event of which it has knowledge, occurring after the date
hereof, which will entitle the Agent or such Bank, as the case may be, to
compensation pursuant to this Section and will designate a different
Applicable Lending Office if such designation will avoid the need for, or
reduce the amount of, such compensation and will not, in the judgment of the
Agent or such Bank, be otherwise disadvantageous to the Agent or such Bank.
If the Agent or a Bank fails to give such notice within 45 days after it
obtains knowledge of such a Regulatory Change, the Agent or such Bank shall,
with respect to compensation payable pursuant to this Section, only be
entitled to payment under this Section for costs incurred from and after the
date 45 days prior to the date that the Agent or such Bank does give such
notice. A certificate of the Agent or a Bank claiming compensation under
this Section, setting forth the additional amount or amounts to be paid to it
hereunder and stating in reasonable detail the basis for the charge and the
method of computation, shall be conclusive in the absence of manifest error.
In determining such amount, the Agent or a Bank may use any reasonable
averaging and attribution methods. Failure on the part of the Agent or a
Bank to demand compensation for any increased costs or reduction in amounts
received or receivable with respect to any period shall not constitute a
waiver of the Agent's or that Bank's rights to demand compensation for any
increased costs or reduction in amounts received or receivable in any
subsequent period (subject to the limitation contained in the third preceding
sentence).
PART C -- GENERAL
Section 2.14 OPTIONAL REDUCTION OF COMMITMENT AMOUNTS OR TERMINATION OF
COMMITMENTS. The Borrower may, at any time, upon not less than five Business
Days prior written notice to the Agent, reduce the Commitment Amounts, ratably,
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with any such reduction in a minimum aggregate amount for all the Banks of
$1,000,000 or, if more, in an integral multiple of $1,000,000; PROVIDED,
HOWEVER, that the Borrower may not at any time reduce the Aggregate Commitment
Amounts below the Total Outstandings. The Borrower may, at any time when there
are no Letters of Credit outstanding, upon not less than five Business Days
prior written notice to the Agent, terminate the Commitments in their entirety.
Upon termination of the Commitments pursuant to this Section, the Borrower
shall pay to the Agent for the account of the Banks the full amount of all
outstanding Advances, all accrued and unpaid interest thereon, all unpaid
Commitment Fees accrued to the date of such termination, any indemnities
payable with respect to Advances pursuant to Section 2.26 and all other unpaid
obligations of the Borrower to the Agent and the Banks hereunder.
Section 2.15 LOANS TO COVER UNPAID DRAWINGS. Whenever any Unpaid
Drawing exists for which there are not then funds in the Holding Account to
cover the same, the Agent shall give the other Banks notice to that effect,
specifying the amount thereof, in which event each Bank is authorized (and
the Borrower does here so authorize each Bank) to, and shall, make a Loan (as
a Base Rate Advance) to the Borrower in an amount equal to such Bank's
Commitment Percentage of the amount of the Unpaid Drawing, subject, however,
to the limitations set forth in Section 2.14. The Agent shall notify each
Bank promptly on the date such Unpaid Drawing occurs of the amount of the
Loan to be made by such Bank. Each Bank shall then make such Loan
(regardless of noncompliance with the applicable conditions precedent
specified in Article III hereof and regardless of whether an Event of Default
then exists, but subject to the limitations set forth in Section 2.1) and
each Bank shall provide the Agent with the proceeds of such Loan in
Immediately Available Funds, at the office of the Agent, not later than 3:00
p.m. (Minneapolis time) on the day on which such Bank received such notice.
The Agent shall apply the proceeds of such Loans directly to reimburse itself
for such Unpaid Drawing. If any portion of any such amount paid to the Agent
should be recovered by or on behalf of the Borrower from the Agent in
bankruptcy, by assignment for the benefit of creditors or otherwise, the loss
of the amount so recovered shall be ratably shared between and among the
Banks in the manner contemplated by Section 8.10 hereof. If at the time the
Banks make funds available to the Agent pursuant to the provisions of this
Section, the applicable conditions precedent specified in Article III shall
not have been satisfied, the Borrower shall pay to the Agent for the account
of the Banks interest on the funds so advanced at a floating rate per annum
equal to the sum of the Base Rate plus the Applicable Margin for Base Rate
Advances plus two percent (2.00%). If for any reason the Banks are unable
to make Loans to the Borrower in an aggregate amount sufficient to reimburse
the Agent for an Unpaid Drawing (including, without limitation, the
application of the limitations set forth in Section 2.8), and there are not
funds available in the Holding Account to make such reimbursement, then the
Banks (other than U.S. Bank) shall immediately purchase from the Agent a risk
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participation in such Unpaid Drawing, at par, in amounts equal to each such
Bank's Commitment Percentage of the Unpaid Drawing.
Section 2.16 CLOSING FEE; COMMITMENT NONUSE FEE.
(a) CLOSING FEES. On or before the Closing Date the Borrower will
pay to the Agent for its own account a fee (the "Closing Fee") in an
amount separately agreed upon by the Borrower and the Agent.
(b) COMMITMENT NONUSE FEES. The Borrower shall pay to the Agent for
the account of each Bank fees (the "Commitment Nonuse Fees") in an amount
determined by applying a rate of one-fourth of one percent (0.25%) per
annum to the average daily Unused Commitment of such Bank for the period
from the date of this Agreement to the Termination Date. Such Commitment
Nonuse Fees are payable in arrears quarterly on the last day of each
calendar quarter and on the Termination Date.
Section 2.17 LETTER OF CREDIT FEES. For each Standby Letter of Credit
issued, the Borrower shall pay to the Agent for the account of the Banks, in
advance payable on the date of issuance, a fee (a "Standby Letter of Credit
Fee") in an amount determined by applying a per annum rate equal to the
Applicable Margin for Eurodollar Rate Advances to the original face amount of
such Standby Letter of Credit for the period from the date of issuance to the
scheduled expiration date of such Letter of Credit. In addition to such
Standby Letter of Credit Fees, the Borrower shall pay to the Agent for its
own account, on demand, all issuance, document examination, amendment,
drawing and other fees regularly charged by the Agent to its letter of credit
customers and all out-of-pocket expenses incurred by the Agent in connection
with the issuance, amendment, administration or payment of any Standby Letter
of Credit or Documentary Letter of Credit.
Section 2.18 COMPUTATION. Commitment Nonuse Fees and Standby Letter of
Credit Fees and interest on Advances shall be computed on the basis of actual
days elapsed (or, in the case of Standby Letter of Credit Fees which are paid
in advance, actual days to elapse) and a year of 360 days.
Section 2.19 PAYMENTS. Payments and prepayments of principal of, and
interest on, the Notes and all fees, expenses and other obligations under
this Agreement payable to the Agent or the Banks shall be made without setoff
or counterclaim in Immediately Available Funds not later than 12:00 noon
(Minneapolis time) on the dates called for under this Agreement and the Notes
to the Agent at its main office in Minneapolis, Minnesota. Funds received
after such time shall be deemed to have been received on the next Business
Day. The Agent will promptly distribute in like funds to each Bank its
ratable share of each such payment of principal, interest, Commitment Fees
and Standby Letter of Credit Fees
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received, by the Agent for the account of the Banks. Whenever any payment to
be made hereunder or on the Notes shall be stated to be due on a day which is
not a Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time, in the case of a payment of
principal, shall be included in the computation of any interest on such
principal payment.
Section 2.20 COMMITMENT ENDING DATE. The "Commitment Ending Date" is
December 31, 2000.
Section 2.21 USE OF LOAN PROCEEDS. The proceeds of the Loans shall be
used for the Borrower's working capital and general corporate purposes in a
manner not in conflict with any of the Borrower's covenants in this Agreement.
Section 2.22 INTEREST RATE NOT ASCERTAINABLE, ETC. If, on or prior to
the date for determining the Adjusted Eurodollar Rate in respect of the
Interest Period for any Eurodollar Rate Advance, any Bank determines (which
determination shall be conclusive and binding, absent error) that:
(a) deposits in dollars (in the applicable amount) are not being
made available to such Bank in the relevant market for such Interest
Period, or
(b) the Adjusted Eurodollar Rate will not adequately and fairly
reflect the cost to such Bank of funding or maintaining Eurodollar Rate
Advances for such Interest Period,
such Bank shall forthwith give notice to the Borrower and the other Banks of
such determination, whereupon the obligation of such Bank to make or
continue, or to convert any Advances to, Eurodollar Rate Advances shall be
suspended until such Bank notifies the Borrower and the Agent that the
circumstances giving rise to such suspension no longer exist. While any such
suspension continues, all further Advances by such Bank shall be made as Base
Rate Advances. No such suspension shall affect the interest rate then in
effect during the applicable Interest Period for any Eurodollar Rate Advance
outstanding at the time such suspension is imposed.
Section 2.23 INCREASED COST. If any Regulatory Change:
(a) shall subject any Bank (or its Applicable Lending Office) to any
tax, duty or other charge with respect to its Eurodollar Rate Advances,
its Note or its obligation to make Eurodollar Rate Advances or shall
change the basis of taxation of payment to any Bank (or its Applicable
Lending Office) of the principal of or interest on its Eurodollar Rate
Advances or any other amounts due under this Agreement in respect of its
Eurodollar Rate Advances or its obligation to make Eurodollar Rate
Advances (except for changes in the rate of tax on the overall net income
of such Bank or its Applicable Lending Office
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imposed by the jurisdiction in which such Bank's principal office or
Applicable Lending Office is located); or
(b) shall impose, modify or deem applicable any reserve, special
deposit, capital requirement or similar requirement (including, without
limitation, any such requirement imposed by the Board, but excluding with
respect to any Eurodollar Rate Advance any such requirement to the extent
included in calculating the applicable Adjusted Eurodollar Rate) against
assets of, deposits with or for the account of, or credit extended by, any
Bank's Applicable Lending Office or shall impose on any Bank (or its
Applicable Lending Office) or the interbank Eurodollar market any other
condition affecting its Eurodollar Rate Advances, its Note or its
obligation to make Eurodollar Rate Advances;
and the result of any of the foregoing is to increase the cost to such Bank
(or its Applicable Lending Office) of making or maintaining any Eurodollar
Rate Advance, or to reduce the amount of any sum received or receivable by
such Bank (or its Applicable Lending Office) under this Agreement or under
its Note, then, within 30 days after demand by such Bank (with a copy to the
Agent), the Borrower shall pay to such Bank such additional amount or amounts
as will compensate such Bank for such increased cost or reduction. Each Bank
will promptly notify the Borrower and the Agent of any event of which it has
knowledge, occurring after the date hereof, which will entitle such Bank to
compensation pursuant to this Section and will designate a different
Applicable Lending Office if such designation will avoid the need for, or
reduce the amount of, such compensation and will not, in the judgment of such
Bank, be otherwise disadvantageous to such Bank. If any Bank fails to give
such notice within 45 days after it obtains knowledge of such an event, such
Bank shall, with respect to compensation payable pursuant to this Section,
only be entitled to payment under this Section for costs incurred from and
after the date 45 days prior to the date that such Bank does give such
notice. A certificate of any Bank claiming compensation under this Section,
setting forth the additional amount or amounts to be paid to it hereunder and
stating in reasonable detail the basis for the charge and the method of
computation, shall be conclusive in the absence of manifest error. In
determining such amount, any Bank may use any reasonable averaging and
attribution methods. Failure on the part of any Bank to demand compensation
for any increased costs or reduction in amounts received or receivable with
respect to any Interest Period shall not constitute a waiver of that Bank's
rights to demand compensation for any increased costs or reduction in amounts
received or receivable in any subsequent Interest Period (subject to the
limitation in the third preceding sentence).
Section 2.24 ILLEGALITY. If any Regulatory Change shall make it
unlawful or impossible for any Bank to make, maintain or fund any Eurodollar
Rate Advances, such Bank shall notify the Borrower and the Agent, whereupon
the obligation of
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such Bank to make or continue, or to convert any Advances to, Eurodollar Rate
Advances shall be suspended until such Bank notifies the Borrower and the
Agent that the circumstances giving rise to such suspension no longer exist.
Before giving any such notice, such Bank shall designate a different
Applicable Lending Office if such designation will avoid the need for giving
such notice and will not, in the judgment of such Bank, be otherwise
disadvantageous to such Bank. If such Bank determines that it may not
lawfully continue to maintain any Eurodollar Rate Advances to the end of the
applicable Interest Periods, all of the affected Advances shall be
automatically converted to Base Rate Advances as of the date of such Bank's
notice, and upon such conversion the Borrower shall indemnify such Bank in
accordance with Section 2.26.
Section 2.25 CAPITAL ADEQUACY. In the event that any Regulatory Change
reduces or shall have the effect of reducing the rate of return on any Bank's
capital or the capital of its parent corporation (by an amount such Bank
deems material) as a consequence of its Commitments and/or its Loans to a
level below that which such Bank or its parent corporation could have
achieved but for such Regulatory Change (taking into account such Bank's
policies and the policies of its parent corporation with respect to capital
adequacy), then the Borrower shall, within 15 days after written demand from
such Bank (with a copy to the Agent), pay to such Bank additional amounts
sufficient to compensate such Bank or its parent corporation for such
reduction. Each Bank will promptly notify the Borrower and the Agent of any
event of which it has knowledge, occurring after the date hereof, which will
entitle such Bank to compensation pursuant to this Section and will designate
a different Applicable Lending Office if such designation will avoid the need
for, or reduce the amount of, such compensation and will not, in the judgment
of such Bank, be otherwise disadvantageous to such Bank. If any Bank fails
to give such notice within 45 days after it obtains knowledge of such a
Regulatory Change, such Bank shall, with respect to compensation payable
pursuant to this Section, only be entitled to payment under this Section for
reductions suffered from and after the date 45 days prior to the date that
such Bank does give such notice. A certificate of any Bank claiming
compensation under this Section, setting forth the additional amount or
amounts to be paid to it hereunder and stating in reasonable detail the basis
for the charge and the method of computation, shall be conclusive in the
absence of manifest error. In determining such amount, each Bank may use any
reasonable averaging and attribution methods. Failure on the part of any
Bank to demand compensation for any reductions with respect to any period
shall not constitute a waiver of that Bank's rights to demand compensation
for any increased costs or reduction in amounts received or receivable in any
subsequent period (subject to the limitation contained in the third preceding
sentence).
Section 2.26 FUNDING LOSSES; EURODOLLAR RATE ADVANCES. The Borrower
shall compensate each Bank, upon its written request, for all losses,
expenses and
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liabilities (including any interest paid by such Bank to lenders of funds
borrowed by it to make or carry Eurodollar Rate Advances to the extent not
recovered by such Bank in connection with the reemployment of such funds and
including loss of anticipated profits) which such Bank may sustain: (i) if
for any reason, other than a default by such Bank, a funding of a Eurodollar
Rate Advance does not occur on the date specified therefor in the Borrower's
request or notice as to such Advance under Section 2.2 or 2.4, or (ii) if,
for whatever reason (including, but not limited to, acceleration of the
maturity of Advances following an Event of Default), any repayment of a
Eurodollar Rate Advance, or a conversion pursuant to Section 2.24, or an
assignment pursuant to Section 2.28(c), occurs on any day other than the last
day of the Interest Period applicable thereto. A Bank's request for
compensation shall set forth the basis for the amount requested and shall be
final, conclusive and binding, absent error.
Section 2.27 DISCRETION OF BANKS AS TO MANNER OF FUNDING. Each Bank
shall be entitled to fund and maintain its funding of Eurodollar Rate
Advances in any manner it may elect, it being understood, however, that for
the purposes of this Agreement all determinations hereunder (including, but
not limited to, determinations under Section 2.26, but excluding
determinations that the Agent may elect to make from the Reuters screen)
shall be made as if such Bank had actually funded and maintained each
Eurodollar Rate Advances during the Interest Period for such Advance through
the purchase of deposits having a maturity corresponding to the last day of
the Interest Period and bearing an interest rate equal to the Eurodollar Rate
for such Interest Period.
Section 2.28 WITHHOLDING TAXES.
(a) BANKS TO SUBMIT FORMS. Each Bank represents to the Borrower and
the Agent that it is either (i) a corporation organized under the laws of
the United States or any State thereof or (ii) is entitled to complete
exemption from United States withholding tax imposed on or with respect to
any payments, including fees, to be made pursuant to this Agreement (x)
under an applicable provision of a tax convention to which the United
States is a party or (y) because it is acting through a branch, agency or
office in the United States and any payment to be received by it hereunder
is effectively connected with a trade or business in the United States.
Each Bank that is not a United States person (as such term is defined in
Section 7701(a)(30) of the Code) shall submit to the Borrower and the
Agent, on or before the date of this Agreement or the day on which such
Bank becomes such under Section 9.6, as applicable, duly completed and
signed copies of either Form 1001 (relating to such Bank and entitling it
to a complete exemption from withholding on all payments to be received by
such Bank hereunder) or Form 4224 (relating to all payments to be received
by such Bank hereunder) of the United States Internal Revenue Service, and
each Bank that is a United States person on
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the date hereof or on the date it becomes a Bank under Section 9.6, as
applicable, but subsequently ceases to be a United States person shall
promptly notify the Borrower and the Agent and provide them either Form
1001 or Form 4224, as applicable. In addition, each Bank that is not a
United States person shall, from time to time, submit to the Borrower
and the Agent such additional duly completed and signed copies of one or
the other of such Forms (or such successor Forms as shall be adopted
from time to time by the relevant United States taxing authorities) as
may be (i) reasonably requested by the Borrower or the Agent and (ii)
required and permitted under then-current United States law or
regulations to avoid United States withholding taxes on payments in
respect of all payments to be received by such Bank hereunder. Upon the
request of the Borrower or the Agent, each Bank that is a United States
person (as such term is defined in Section 7701(a)(30) of the Code)
shall submit to the Borrower and the Agent a certificate in such form as
is reasonably satisfactory to the Borrower and the Agent to the effect
that it is such a United States person.
(b) INABILITY OF A BANK. If any Bank that is not a United
States person (as such term is defined in Section 7701(a)(30) of the
Code) determines that, as a result of any Regulatory Change, the
Borrower is required by law or regulation to make any deduction,
withholding or backup withholding of any taxes, levies, imposts, duties,
fees, liabilities or similar charges of the United States of America,
any possession or territory of the United States of America (including
the Commonwealth of Puerto Rico) or any area subject to the jurisdiction
of the United States of America ("U.S. TAXES") from any payments to a
Bank pursuant to any Loan Document in respect of the Obligations payable
to such Bank then or thereafter outstanding, the amount payable will be
increased to the amount which, after deduction from such increased
amount of all U.S. Taxes required to be withheld or deducted therefrom,
will yield the amount required under any Loan Document to be paid with
respect thereto; PROVIDED, that the Borrower shall not be required to
pay any additional amount pursuant to this Section 2.28(b) to any Bank
(i) that is not, either on the date this Agreement is executed by such
Bank or on the date such Bank becomes such under Section 9.6, either (x)
entitled to submit Form 1001 (relating to such Bank and entitling it to
a complete exemption from withholding on all payments to be received by
such Bank hereunder) or Form 4224 (relating to all payments to be
received by such Bank hereunder) or (y) a United States person (as such
term is defined in Section 7701(a)(30) of the Code), or (ii) that has
failed to submit any form or certificate that it was required to file
pursuant to subsection (a) and entitled to file under applicable law or
(iii) arising from such Bank's failure to comply with any certification,
identification or other similar requirement under United States income
tax laws or regulations (including backup withholding) to establish
entitlement to exemption from such U.S. Taxes; and PROVIDED, FURTHER,
that if
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a Bank, as a result of any amount paid by the Borrower to such Bank
pursuant to this Section 2.28, shall realize a tax credit or refund, which
tax credit or refund would not have been realized but for the Borrower's
payment of such amount, such Bank shall pay to the Borrower an amount
equal to such tax credit or refund. Each Bank may determine the portion,
if any, of any tax credit or refund attributable to the Borrower's
payments using such attribution and accounting methods as such Bank
reasonably selects, and such Bank's determination of the portion of any
tax credit or refund attributable to the Borrower's payments shall be
conclusive in the absence of manifest error. The obligation of the
Borrower under this Section 2.28(b) shall survive the payment in full of
the Obligations and the termination of the Commitment of such Bank.
(c) SUBSTITUTION OF BANK. In the event the Borrower is
required pursuant to this Section 2.28 to pay any additional amount to
any Bank, such Bank shall, if no Event of Default or Unmatured Event of
Default has occurred and is continuing, upon the request of the Borrower
to such Bank and the Agent, assign, pursuant to and in accordance with
the provisions of Section 9.6, all of its rights and obligations under
this Agreement and under such Bank's Note to another Bank or a
Transferee selected by the Borrower and reasonably satisfactory to the
Agent, in consideration for (i) the payment by such assignee to the
assigning Bank of the principal of, and interest accrued and unpaid to
the date of such assignment on, the Note of such Bank, (ii) the payment
by the Borrower to the assigning Bank of any and all other amounts owing
to such Bank under any provision of this Agreement accrued and unpaid to
the date of such assignment and (iii) the Borrower's release of the
assigning Bank from any further obligation or liability under this
Agreement. Upon any such assignment, the Borrower shall indemnify the
assigning Bank as provided in Section 2.26. Notwithstanding anything to
the contrary in this Section 2.28(c), in no event shall the replacement
of any Bank result in a decrease in the Aggregate Commitment Amounts
without the written consent of the Majority Banks.
ARTICLE III
CONDITIONS PRECEDENT
Section 3.1 CONDITIONS PRECEDENT TO ALL LOANS AND LETTERS OF
CREDIT. The obligation of the Banks to make any Loans hereunder and of
the Agent to issue each Letter of Credit shall be subject to the
fulfillment of the following conditions:
3.1(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained in Article IV shall be true and correct on and as of
the date of this Agreement and on the date of each Loan or the date of
issuance of
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each Letter of Credit, with the same force and effect as if made on such
date, except for representations and warranties that are expressly made as
of a given date, which representations and warranties shall be true and
correct as of such date.
3.1(b) NO DEFAULT. No Default or Event of Default shall have
occurred and be continuing on the date of this Agreement and on the date
of each Loan or the date of issuance of each Letter of Credit or will
exist after giving effect to the Loans made on such date or the Letter of
Credit so issued.
3.1(c) NOTICES AND REQUESTS. The Agent shall have received the
Borrower's request for such Loans as required under Section 2.2 or its
application for such Letters of Credit specified under Section 2.9.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
To induce the Banks to enter into this Agreement and to make Loans
hereunder and to induce the Agent to issue Letters of Credit, the Borrower
represents and warrants to the Banks:
Section 4.1 ORGANIZATION, STANDING, ETC. The Borrower is a corporation
duly incorporated and validly existing and in good standing under the laws of
the jurisdiction of its incorporation and has all requisite corporate power
and authority to carry on its business as now conducted, to enter into this
Agreement and to issue the Notes and to perform its obligations under the
Borrower Loan Documents. Each Subsidiary is a corporation duly incorporated
and validly existing and in good standing under the laws of the jurisdiction
of its incorporation and has all requisite corporate power and authority to
carry on its business as now conducted. Each of the Borrower and the
Subsidiaries (a) holds all certificates of authority, licenses and permits
necessary to carry on its business as presently conducted in each
jurisdiction in which it is carrying on such business, except where the
failure to hold such certificates, licenses or permits would not have a
material adverse effect on the business, operations, property, assets or
condition, financial or otherwise, of the Borrower and the Subsidiaries taken
as a whole, and (b) is duly qualified and in good standing as a foreign
corporation in each jurisdiction in which the character of the properties
owned, leased or operated by it or the business conducted by it makes such
qualification necessary and the failure so to qualify would permanently
preclude the Borrower or such Subsidiary from enforcing its rights with
respect to any assets or expose the Borrower or such Subsidiary to any
liability, which in either case would be material to the Borrower and the
Subsidiaries taken as a whole.
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Section 4.2 AUTHORIZATION AND VALIDITY. The execution, delivery and
performance by the Borrower of the Borrower Loan Documents have been duly
authorized by all necessary corporate action by the Borrower, and this
Agreement constitutes, and the Notes and other Borrower Loan Documents when
executed will constitute, the legal, valid and binding obligations of the
Borrower, enforceable against the Borrower in accordance with their
respective terms, subject to limitations as to enforceability which might
result from bankruptcy, insolvency, moratorium and other similar laws
affecting creditors' rights generally and subject to limitations on the
availability of equitable remedies.
Section 4.3 NO CONFLICT; NO DEFAULT. The execution, delivery and
performance by the Borrower of the Borrower Loan Documents will not (a)
violate any provision of any law, statute, rule or regulation or any order,
writ, judgment, injunction, decree, determination or award of any court,
governmental agency or arbitrator presently in effect having applicability to
the Borrower, (b) violate or contravene any provision of the Articles of
Incorporation or bylaws of the Borrower, or (c) result in a breach of or
constitute a default under any indenture, loan or credit agreement or any
other agreement, lease or instrument to which the Borrower is a party or by
which it or any of its properties may be bound or result in the creation of
any Lien thereunder and which breach, default or Lien would have a material
adverse effect on the business, operations, property, assets or condition
(financial or otherwise) of the Borrower and the Subsidiaries taken as a
whole. Neither the Borrower nor any Subsidiary is in default under or in
violation of any such law, statute, rule or regulation, order, writ,
judgment, injunction, decree, determination or award or any such indenture,
loan or credit agreement or other agreement, lease or instrument in any case
in which the consequences of such default or violation could have a material
adverse effect on the business, operations, properties, assets or condition
(financial or otherwise) of the Borrower and its Subsidiaries taken as a
whole.
Section 4.4 GOVERNMENT CONSENT. No order, consent, approval, license,
authorization or validation of, or filing, recording or registration with, or
exemption by, any governmental or public body or authority is required on the
part of the Borrower to authorize, or is required in connection with the
execution, delivery and performance of, or the legality, validity, binding
effect or enforceability of, the Borrower Loan Documents, except for any
necessary filing or recordation of or with respect to any of the Security
Documents.
Section 4.5 FINANCIAL STATEMENTS AND CONDITION. The Borrower's audited
consolidated financial statements as at December 31, 1996 and its unaudited
consolidated financial statements as at November __, 1997, as heretofore
furnished to the Banks, have been prepared in accordance with GAAP on a
consistent basis and fairly present the financial condition of the Borrower
and its Subsidiaries as at such dates and the results of their operations and
changes in financial position for
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the respective periods then ended. As of the dates of such financial
statements, neither the Borrower nor any Subsidiary had any material
obligation, contingent liability, liability for taxes or long-term lease
obligation which is not reflected in such financial statements or in the
notes thereto. Since November __, 1997 there has been no material adverse
change in the business, operations, property, assets or condition, financial
or otherwise, of the Borrower and its Subsidiaries taken as a whole.
Section 4.6 LITIGATION. There are no actions, suits or proceedings
pending or, to the knowledge of the Borrower, threatened against or affecting
the Borrower or any Subsidiary or any of their properties before any court or
arbitrator, or any governmental department, board, agency or other
instrumentality which would have a material adverse effect on the business,
operations, property or condition (financial or otherwise) of the Borrower
and the Subsidiaries taken as a whole or on the ability of the Borrower or
any Subsidiary to perform its obligations under the Loan Documents.
Section 4.7 ENVIRONMENTAL, HEALTH AND SAFETY LAWS. There does not
exist any violation by the Borrower or any Subsidiary of any applicable
federal, state or local law, rule or regulation or order of any government,
governmental department, board, agency or other instrumentality relating to
environmental, pollution, health or safety matters which will or threatens to
impose a material liability on the Borrower or a Subsidiary or which would
require a material expenditure by the Borrower or such Subsidiary to cure.
Neither the Borrower nor any Subsidiary has received any notice to the effect
that any part of its operations or properties is not in material compliance
with any such law, rule, regulation or order or notice that it or its
property is the subject of any governmental investigation evaluating whether
any remedial action is needed to respond to any release of any toxic or
hazardous waste or substance into the environment, which noncompliance or
remedial action could reasonably be expected to have a material adverse
effect on the business, operations, properties, assets or condition
(financial or otherwise) of the Borrower and its Subsidiaries taken as a
whole.
Section 4.8 ERISA. Each Plan is in substantial compliance with all
applicable requirements of ERISA and the Code and with all material applicable
rulings and regulations issued under the provisions of ERISA and the Code
setting forth those requirements. No Reportable Event has occurred and is
continuing with respect to any Plan. All of the minimum funding standards
applicable to such Plans have been satisfied and there exists no event or
condition which would reasonably be expected to result in the institution of
proceedings to terminate any Plan under Section 4042 of ERISA. With respect to
each Plan subject to Title IV of ERISA, as of the most recent valuation date
for such Plan, the present value (determined on the basis of reasonable
assumptions employed by the independent actuary for such Plan
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and previously furnished in writing to the Banks) of such Plan's projected
benefit obligations did not exceed the fair market value of such Plan's
assets.
Section 4.9 FEDERAL RESERVE REGULATIONS. Neither the Borrower nor any
Subsidiary is engaged principally or as one of its important activities in
the business of extending credit for the purpose of purchasing or carrying
margin stock (as defined in Regulation U of the Board). The value of all
margin stock owned by the Borrower does not constitute more than 25% of the
value of the assets of the Borrower.
Section 4.10 TITLE TO PROPERTY; LEASES; LIENS; SUBORDINATION. The
Borrower has (a) good and marketable title to real properties owned by it and
(b) good and sufficient title to, or valid, subsisting and enforceable
leasehold interest in, its other material properties, including all real
properties, other properties and assets, referred to as owned by the Borrower
in the most recent financial statement referred to in Section 4.5 (other than
property disposed of since the date of such financial statements in the
ordinary course of business). None of such properties is subject to a Lien,
except as allowed under Section 6.13. The Borrower has not subordinated any
of its rights under any obligation owing to it to the rights of any other
person.
Section 4.11 TAXES. Each of the Borrower and the Subsidiaries has
filed all federal, state and local tax returns required to be filed and has
paid or made provision for the payment of all taxes due and payable pursuant
to such returns and pursuant to any assessments made against it or any of its
property and all other taxes, fees and other charges imposed on it or any of
its property by any governmental authority (other than taxes, fees or charges
the amount or validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which reserves in accordance with
GAAP have been provided on the books of the Borrower). No tax Liens have
been filed and no material claims are being asserted with respect to any such
taxes, fees or charges. The charges, accruals and reserves on the books of
the Borrower in respect of taxes and other governmental charges are adequate
and the Borrower knows of no proposed tax assessment against it or any
Subsidiary which would have a material adverse effect on the business,
operations, properties, assets or condition (financial or otherwise) of the
Borrower and its Subsidiaries taken as a whole.
Section 4.12 TRADEMARKS, PATENTS. Each of the Borrower and the
Subsidiaries possesses or has the right to use all of the patents,
trademarks, trade names, service marks and copyrights, and applications
therefor, and all technology, know-how, processes, methods and designs used
in or necessary for the conduct of its business, without known conflict with
the rights of others.
Section 4.13 BURDENSOME RESTRICTIONS. Neither the Borrower nor any
Subsidiary is a party to or otherwise bound by any indenture, loan or credit
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agreement or any lease or other agreement or instrument or subject to any
charter, corporate or partnership restriction which would foreseeably have a
material adverse effect on the business, properties, assets, operations or
condition (financial or otherwise) of the Borrower or such Subsidiary or on
the ability of the Borrower or any Subsidiary to carry out its obligations
under any Loan Document.
Section 4.14 FORCE MAJEURE. Since the date of the most recent
financial statement referred to in Section 4.5, the business, properties and
other assets of the Borrower and the Subsidiaries have not been materially
and adversely affected in any way as the result of any fire or other
casualty, strike, lockout, or other labor trouble, embargo, sabotage,
confiscation, condemnation, riot, civil disturbance, activity of armed forces
or act of God.
Section 4.15 INVESTMENT COMPANY ACT. Neither the Borrower nor any
Subsidiary is an "investment company" or a company "controlled" by an
investment company within the meaning of the Investment Company Act of 1940,
as amended.
Section 4.16 PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Borrower
nor any Subsidiary is a "holding company" or a "subsidiary company" of a
holding company or an "affiliate" of a holding company or of a subsidiary
company of a holding company within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
Section 4.17 RETIREMENT BENEFITS. Except as required under Section
4980B of the Code, Section 601 of ERISA or applicable state law, neither the
Borrower nor any Subsidiary is obligated to provide post-retirement medical
or insurance benefits with respect to employees or former employees.
Section 4.18 FULL DISCLOSURE. Subject to the following sentence,
neither the financial statements referred to in Section 4.5 nor any other
certificate, written statement, exhibit or report furnished by or on behalf
of the Borrower in connection with or pursuant to this Agreement contains any
untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements contained therein not misleading.
Certificates or statements furnished by or on behalf of the Borrower to the
Banks consisting of projections or forecasts of future results or events have
been prepared in good faith and based on good faith estimates and assumptions
of the management of the Borrower, and, as of the date of this Agreement
(except as the Borrower has otherwise disclosed to the Banks in writing), the
Borrower has no reason to believe that such projections or forecasts are not
reasonable.
Section 4.19 SUBSIDIARIES. Exhibit 4.19 sets forth as of the date of
this Agreement a list of all Subsidiaries and the number and percentage of
the shares of
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each class of capital stock owned beneficially or of record by the
Borrower or any Subsidiary therein, and the jurisdiction of incorporation of
each Subsidiary.
ARTICLE V
AFFIRMATIVE COVENANTS
Until any obligation of the Banks hereunder to make the Loans and of the
Agent to issue Letters of Credit shall have expired or been terminated and the
Notes and all of the other Obligations have been paid in full and all
outstanding Letters of Credit shall have expired or the liability of the Agent
thereon shall have otherwise been discharged, unless the Majority Banks shall
otherwise consent in writing:
Section 5.1 FINANCIAL STATEMENTS AND REPORTS. The Borrower will furnish
to the Banks:
5.1(a) As soon as available and in any event within 90 days after
the end of each fiscal year of the Borrower, the audited consolidated
financial statements of the Borrower and the Subsidiaries consisting of at
least statements of income, cash flow and changes in stockholders' equity,
and a balance sheet as at the end of such year, setting forth in each case
in comparative form corresponding figures from the previous annual audit,
together with an unqualified opinion with respect to such audited
financial statements from Xxxxxx Xxxxxxxx LLP or other independent
certified public accountants of recognized national standing selected by
the Borrower and acceptable to the Agent, together with any management
letters and written supplementary reports of a material nature furnished
to the Borrower or its board of directors by such accountants.
5.1(b) Together with the audited financial statements required under
Section 5.1(a), a statement by the accounting firm performing such audit
to the effect that it has reviewed this Agreement and that in the course
of performing its examination nothing came to its attention that caused it
to believe that any Default or Event of Default exists, or, if such
Default or Event of Default exists, describing its nature.
5.1(c) As soon as available and in any event within 30 days after
the end of each fiscal month, an unaudited consolidated statement of
income for the Borrower and the Subsidiaries for such fiscal month and for
the period from the beginning of such fiscal year to the end of such
fiscal month, and a balance sheet of the Borrower as at the end of such
month, setting forth in comparative form figures for the preceding fiscal
year.
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5.1(d) As soon as available and in any event within 45 days after
the end of each of the first three fiscal quarters of each fiscal year of
the Borrower, (i) an unaudited consolidated statement of income for the
Borrower and the Subsidiaries for such quarter and for the period from the
beginning of such fiscal year to the end of such fiscal quarter, setting
forth in comparative form figures for the corresponding period for the
preceding fiscal year, (ii) an unaudited consolidated statement of cash
flow for the Borrower and the Subsidiaries for the period from the
beginning of such fiscal year to the end of such fiscal quarter, setting
forth in comparative form figures for the corresponding period for the
preceding fiscal year, (iii) a consolidated balance sheet of the Borrower
and the Subsidiaries as at the end of such fiscal quarter, setting forth
in comparative form figures for the preceding fiscal year, and (iv) a
certificate signed by the Chief Financial Officer or Director of Treasury
of the Borrower stating that, to the best knowledge of such officer, such
financial statements present fairly the consolidated financial condition
of the Borrower and the Subsidiaries and that the same have been prepared
in accordance with GAAP except for the omission of footnotes and subject
to year-end adjustments.
5.1(e) Together with each of the annual and quarterly financial
statements required under Sections 5.1(a) and 5.1(d), a Compliance
Certificate in the form attached hereto as Exhibit 5.1(e) signed by the
Chief Financial Officer or Director of Treasury of the Borrower
demonstrating in reasonable detail compliance (or noncompliance, as the
case may be) with Sections 6.6, 6.8, 6.15, 6.16, 6.17, 6.18 and 6.19 as at
the end of such quarter and stating that, to the best knowledge of such
officer, as at the end of such quarter there did not exist any Default or
Event of Default or, if such Default or Event of Default existed,
specifying the nature and period of existence thereof and what action the
Borrower proposes to take with respect thereto.
5.1(f) As soon as practicable and in any event within 20 days after
the end of each fiscal month, a Borrowing Base Certificate signed by the
Chief Financial Officer or Director of Treasury of the Borrower, reporting
the Borrowing Base as of the last day of the fiscal month just ended.
5.1(g) As soon as practicable and in any event within 45 days after
the beginning of each fiscal year of the Borrower, statements of
forecasted consolidated income and forecasted consolidated cash flow for
the Borrower and the Subsidiaries for each fiscal quarter in such fiscal
year and a forecasted consolidated balance sheet of the Borrower and the
Subsidiaries, together with supporting assumptions, as at the end of each
fiscal quarter, all in reasonable detail and reasonably satisfactory in
scope to Majority Banks.
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5.1(h) Immediately upon any Responsible Officer of the Borrower
becoming aware of any Default or Event of Default, a notice describing the
nature thereof and what action the Borrower proposes to take with respect
thereto.
5.1(i) Immediately upon any Responsible Officer of the Borrower
becoming aware of the occurrence, with respect to any Plan, of any
Reportable Event or any Prohibited Transaction, a notice specifying the
nature thereof and what action the Borrower proposes to take with respect
thereto, and, when received, copies of any notice from PBGC of intention
to terminate or have a trustee appointed for any Plan.
5.1(j) Promptly upon the mailing or filing thereof, copies of all
financial statements, reports and proxy statements mailed to the
Borrower's shareholders, and copies of all registration statements,
periodic reports and other documents filed with the Securities and
Exchange Commission (or any successor thereto) or any national securities
exchange.
5.1(k) Immediately upon any member of the Borrower's Board of
Directors ceasing to be such member, and immediately upon any person
becoming a member of the Borrower's Board of Directors, a notice
disclosing such fact and identifying the member who has ceased to be such
or who has become such, as the case may be.
5.1(l) From time to time, such other information regarding the
business, operation and financial condition of the Borrower and the
Subsidiaries as any Bank may reasonably request.
Section 5.2 CORPORATE EXISTENCE. The Borrower will maintain, and cause
each Subsidiary to maintain, its corporate existence in good standing under
the laws of its jurisdiction of incorporation and its qualification to transact
business in each jurisdiction where failure so to qualify would permanently
preclude the Borrower or such Subsidiary from enforcing its rights with respect
to any material asset or would expose the Borrower or such Subsidiary to any
material liability; provided, however, that nothing herein shall prohibit the
merger or liquidation of any Subsidiary allowed under Section 6.1.
Section 5.3 INSURANCE. The Borrower shall maintain, and shall cause each
Subsidiary to maintain, with financially sound and reputable insurance
companies such insurance as may be required by law and such other insurance in
such amounts and against such hazards as is customary in the case of reputable
firms engaged in the same or similar business and similarly situated. The
Agent shall be named as an additional insured and as an additional loss payee
of such insurance,
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shall be entitled to receive at least 30 days prior written notice of
cancellation thereof, and shall receive certificates evidencing such
insurance.
Section 5.4 PAYMENT OF TAXES AND CLAIMS. The Borrower shall file, and
cause each Subsidiary to file, all tax returns and reports which are required
by law to be filed by it and will pay, and cause each Subsidiary to pay,
before they become delinquent all taxes, assessments and governmental charges
and levies imposed upon it or its property and all claims or demands of any
kind (including but not limited to those of suppliers, mechanics, carriers,
warehouses, landlords and other like Persons) which, if unpaid, might result
in the creation of a Lien upon its property; provided that the foregoing
items need not be paid if they are being contested in good faith by
appropriate proceedings, and as long as the Borrower's or such Subsidiary's
title to its property is not materially adversely affected, its use of such
property in the ordinary course of its business is not materially interfered
with and adequate reserves with respect thereto have been set aside on the
Borrower's or such Subsidiary's books in accordance with GAAP.
Section 5.5 INSPECTION; COLLATERAL AUDITS. (a) The Borrower shall
permit, and shall cause each Subsidiary to permit, any Person designated by the
Agent or the Majority Banks to visit and inspect any of the properties,
corporate books and financial records of the Borrower and the Subsidiaries, to
examine and to make copies of the books of accounts and other financial records
of the Borrower and the Subsidiaries, and to discuss the affairs, finances and
accounts of the Borrower and the Subsidiaries with, and to be advised as to the
same by, its officers at such reasonable times, during normal business hours,
and intervals as the Agent or the Majority Banks may designate. So long as no
Event of Default exists, the expenses of the Agent or the Banks for such
visits, inspections and examinations shall be at the expense of the Agent and
the Banks, but any such visits, inspections and examinations made while any
Event of Default is continuing shall be at the expense of the Borrower.
(b) Without limiting the foregoing, the Borrower will allow the
Agent to perform collateral audits from time to time by a Person or
Persons selected by the Agent. Unless an Event of Default has occurred,
the Borrower shall be obligated to pay for only one such collateral audit
per year and the Agent and the Banks shall bear the expense of any
additional collateral audits. Notwithstanding the preceding sentence, the
Agent may conduct collateral audits at any time if an Event of Default
has occurred which is continuing, and the cost of any such audits shall be
paid by the Borrower.
(c) Any Bank may, at its own expense and at no additional expense to
the Borrower, participate in any inspection or audit conducted by or at
the direction of the Agent or the Majority Banks pursuant to this Section
5.5.
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Section 5.6 MAINTENANCE OF PROPERTIES. The Borrower will maintain, and
cause each Subsidiary to maintain, its properties used or useful in the conduct
of its business in good condition, repair and working order, and supplied with
all necessary equipment, and make all necessary repairs, renewals,
replacements, betterments and improvements thereto, all as may be necessary so
that the business carried on in connection therewith may be conducted in the
normal course.
Section 5.7 BOOKS AND RECORDS. The Borrower will keep, and will cause
each Subsidiary to keep, adequate and proper records and books of account in
which full and correct entries will be made of its dealings, business and
affairs.
Section 5.8 COMPLIANCE. The Borrower will comply, and will cause each
Subsidiary to comply, in all material respects with all laws, rules,
regulations, orders, writs, judgments, injunctions, decrees or awards to which
it may be subject; provided, however, that failure so to comply shall not be a
breach of this covenant if such failure does not have, or is not reasonably
expected to have, a material adverse effect on the properties, business,
prospects or condition (financial or otherwise) of the Borrower and the
Subsidiaries taken as a whole and the Borrower or such Subsidiary is either (a)
acting in good faith and with reasonable dispatch to cure such noncompliance or
(b) appealing or contesting in good faith and by appropriate proceedings the
validity or applicability as to the Borrower or such Subsidiary of the law,
rule, regulation, order, writ, judgment, injunction, decree or award as to
which such noncompliance is asserted and as long as the Borrower's or such
Subsidiary's title to its property is not materially adversely affected, its
use of such property in the ordinary course of its business is not materially
interfered with and adequate reserves with respect thereto have been set aside
on the Borrower's or such Subsidiary's books in accordance with GAAP.
Section 5.9 NOTICE OF LITIGATION. The Borrower will give prompt written
notice to the Agent of the commencement of any action, suit or proceeding
before any court or arbitrator or any governmental department, board, agency or
other instrumentality affecting the Borrower or any Subsidiary or any property
of the Borrower or a Subsidiary or to which the Borrower or a Subsidiary is a
party in which an adverse determination or result could have a material adverse
effect on the business, operations, property or condition (financial or
otherwise) of the Borrower and the Subsidiaries taken as a whole or on the
ability of the Borrower or any Subsidiary to perform its obligations under this
Agreement and the other Loan Documents, stating the nature and status of such
action, suit or proceeding.
Section 5.10 ERISA. The Borrower will maintain, and will cause each
Subsidiary to maintain, each Plan in compliance with all material applicable
requirements of ERISA and of the Code and with all applicable rulings and
regulations issued under the provisions of ERISA and of the Code and will not
and not permit any of the ERISA Affiliates to (a) engage in any transaction in
connection
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with which the Borrower or any of the ERISA Affiliates would be
subject to either a civil penalty assessed pursuant to Section 502(i) of ERISA
or a tax imposed by Section 4975 of the Code, in either case in an amount
exceeding $50,000, (b) fail to make full payment when due of all amounts which,
under the provisions of any Plan, the Borrower or any ERISA Affiliate is
required to pay as contributions thereto, or permit to exist any accumulated
funding deficiency (as such term is defined in Section 302 of ERISA and Section
412 of the Code), whether or not waived, with respect to any Plan in an
aggregate amount exceeding $50,000 or (c) fail to make any payments in an
aggregate amount exceeding $50,000 to any Multiemployer Plan that the Borrower
or any of the ERISA Affiliates may be required to make under any agreement
relating to such Multiemployer Plan or any law pertaining thereto.
Section 5.11 ENVIRONMENTAL MATTERS; REPORTING. The Borrower will observe
and comply with, and cause each Subsidiary to observe and comply with, all
laws, rules, regulations and orders of any government or government agency
relating to health, safety, pollution, hazardous materials or other
environmental matters to the extent noncompliance could result in a material
liability or otherwise have a material adverse effect on the Borrower and the
Subsidiaries taken as a whole. The Borrower will give the Agent prompt written
notice of any violation as to any environmental matter by the Borrower or any
Subsidiary and of the commencement of any judicial or administrative proceeding
relating to health, safety or environmental matters (a) in which an adverse
determination or result could result in the revocation of or have a material
adverse effect on any operating permits, air emission permits, water discharge
permits, hazardous waste permits or other permits held by the Borrower or any
Subsidiary which are material to the operations of the Borrower and the
Subsidiaries taken as a whole, or (b) which will or threatens to impose a
material liability on the Borrower or such Subsidiary to any Person or which
will require an expenditure by the Borrower or such Subsidiary to cure any
alleged problem or violation which is a material expense for the Borrower or
the Subsidiaries taken as a whole.
Section 5.12 FURTHER ASSURANCES. The Borrower shall promptly correct any
defect or error that may be discovered in any Loan Document or in the
execution, acknowledgment or recordation thereof. Promptly upon request by the
Agent or the Majority Banks, the Borrower also shall do, execute, acknowledge,
deliver, record, re-record, file, re-file, register and re-register, any and
all deeds, conveyances, mortgages, deeds of trust, trust deeds, assignments,
estoppel certificates, financing statements and continuations thereof, notices
of assignment, transfers, certificates, assurances and other instruments as the
Agent or the Majority Banks may reasonable require from time to time in order:
(a) to carry out more effectively the purposes of the Loan Documents; (b) to
perfect and maintain the validity, effectiveness and priority of any security
interests intended to be created by the Loan Documents including, without
limitation, the delivery of a landlord waiver from any landlord required by the
Agent or the Majority Banks; and (c) to better assure,
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convey, grant, assign, transfer, preserve, protect and confirm unto the Banks
the rights granted now or hereafter intended to be granted to the Banks under
any Loan Document or under any other instrument executed in connection with
any Loan Document or that the Borrower may be or become bound to convey,
mortgage or assign to the Agent for the benefit of the Banks in order to
carry out the intention or facilitate the performance of the provisions of
any Loan Document. The Borrower shall furnish to the Banks evidence
satisfactory to the Majority Banks of every such recording, filing or
registration.
ARTICLE VI
NEGATIVE COVENANTS
Until any obligation of the Banks hereunder to make the Loans and of the
Agent to issue Letters of Credit shall have expired or been terminated and the
Notes and all of the other Obligations have been paid in full and all
outstanding Letters of Credit shall have expired or the liability of the Agent
thereon shall have otherwise been discharged, unless the Majority Banks shall
otherwise consent in writing:
Section 6.1 MERGER. The Borrower will not merge or consolidate or enter
into any analogous reorganization or transaction with any Person or liquidate,
wind up or dissolve itself (or suffer any liquidation or dissolution) or permit
any Subsidiary to do any of the foregoing; PROVIDED, HOWEVER, any Subsidiary
may be merged with or liquidated into the Borrower or any wholly-owned
Subsidiary (if the Borrower or such wholly-owned Subsidiary is the surviving
corporation).
Section 6.2 DISPOSITION OF ASSETS. The Borrower will not, and will not
permit any Subsidiary to, directly or indirectly, sell, assign, lease, convey,
transfer or otherwise dispose of (whether in one transaction or a series of
transactions) any property (including accounts and notes receivable, with or
without recourse) or enter into any agreement to do any of the foregoing,
except:
6.2(a) dispositions of inventory, or used, worn-out or surplus
equipment and computer software, all in the ordinary course of business;
6.2(b) the sale or other disposition of equipment and computer
software to the extent that such equipment or computer software, as the
case may be, is exchanged for credit against the purchase price of similar
replacement equipment or computer software, or the proceeds of such sale
are applied with reasonable promptness to the purchase price of such
replacement equipment or computer software;
6.2(c) the sale by the Borrower to an entity which is not an
Affiliate of the Borrower pursuant to an arm's length transaction, of the
parking lots
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surrounding its principal offices located in Brooklyn Park, Minnesota,
which real estate is more particularly described on Exhibit 6.2(c)
attached hereto;
6.2(d) other dispositions of property whose net book value in the
aggregate does not exceed $750,000 in any fiscal year of the Borrower.
Section 6.3 PLANS. The Borrower will not permit, and will not allow any
Subsidiary to permit, any event to occur or condition to exist which would
permit any Plan to terminate under any circumstances which would cause the Lien
provided for in Section 4068 of ERISA to attach to any assets of the Borrower
or any Subsidiary; and the Borrower will not permit, as of the most recent
valuation date for any Plan subject to Title IV of ERISA, the present value
(determined on the basis of reasonable assumptions employed by the independent
actuary for such Plan and previously furnished in writing to the Banks) of such
Plan's projected benefit obligations to exceed the fair market value of such
Plan's assets.
Section 6.4 CHANGE IN NATURE OF BUSINESS. The Borrower will not, and
will not permit any Subsidiary to, make any change in the nature of its
business which would cause the nature of the business of the Borrower and the
Subsidiaries taken as a whole, to be materially different from the business of
the Borrower, Texas Telemarketing, Inc. and Damark Financial Services, Inc. as
carried on at the date hereof.
Section 6.5 NEGATIVE PLEDGES. The Borrower will not, and will not permit
any Subsidiary to: (a) enter into any agreement, bond, note or other
instrument with or for the benefit of any Person other than the Banks which
would (i) prohibit the Borrower or such Subsidiary from granting, or otherwise
limit the ability of the Borrower or such Subsidiary to grant, to the Agent or
the Banks any Lien on any assets or properties of the Borrower or such
Subsidiary, or (ii) require the Borrower or such Subsidiary to xxxxx x Xxxx to
any other Person if the Borrower or such Subsidiary grants any Lien to the
Agent or the Banks, or (b) place or allow any restriction, directly or
indirectly, on the ability of any Subsidiary to (i) pay dividends or any
distributions on or with respect to such Subsidiary's capital stock or (ii)
make loans or other cash payments to the Borrower.
Section 6.6 RESTRICTED PAYMENTS. The Borrower will not make any
Restricted Payments other than (a) the payment of the purchase price of capital
stock of the Borrower owned by Xxxx Xxxx solely from the proceeds of key man
life insurance on his life, and (b) the payment of the purchase price for other
capital stock of the Borrower repurchased by the Borrower, provided that the
aggregate purchase price paid by the Borrower for capital stock of Borrower
repurchased under this clause (b) shall not exceed (i) $6,000,000 during the
period beginning on March 22, 1996 and ending March 21, 1997 or (ii) $5,000,000
during any period of 365 or 366 days, as the
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case may be, which begins on any date occurring after March 21, 1997 and ends
on the day preceding the same date in the following calendar year.
Section 6.7 TRANSACTIONS WITH AFFILIATES. The Borrower will not, and
will not permit any Subsidiary to, enter into any transaction with any
Affiliate of the Borrower (other than a transaction constituting a Restricted
Payment permitted under Section 6.6), except upon fair and reasonable terms no
less favorable to the Borrower or such Subsidiary than would obtain in a
comparable arm's-length transaction with a Person not an Affiliate.
Section 6.8 ACCOUNTING CHANGES. The Borrower will not, and will not
permit any Subsidiary to, make any significant change in accounting treatment
or reporting practices, except as required by GAAP, or change its fiscal year
or the fiscal year of any Subsidiary.
Section 6.9 CAPITAL EXPENDITURES. The Borrower will not, and will not
permit any Subsidiary to, make Capital Expenditures in an amount exceeding, on
a consolidated basis, (a) $11,500,000 in its fiscal year ending December 31,
1997 or (b) $10,000,000 in its fiscal year ending December 31, 1998 or in any
fiscal year thereafter; provided, however, that Capital Expenditures made, with
the prior written consent of the Majority Banks, from equity capital
specifically raised by the Borrower for the purpose of making such Capital
Expenditures shall not be subject to the foregoing limitations.
Section 6.10 SUBORDINATED DEBT. The Borrower will not, and will not
permit any Subsidiary to, (a) make any scheduled payment of the principal of or
interest on any Subordinated Debt which would be prohibited by the terms of
such Subordinated Debt and any related subordination agreement; (b) directly or
indirectly make any prepayment on or purchase, redeem or defease any
Subordinated Debt or offer to do so (whether such prepayment, purchase or
redemption, or offer with respect thereto, is voluntary or mandatory); (c)
amend or cancel the subordination provisions applicable to any Subordinated
Debt; (d) take or omit to take any action if as a result of such action or
omission the subordination of such Subordinated Debt, or any part thereof, to
the Obligations might be terminated, impaired or adversely affected; or (e)
omit to give the Agent prompt notice of any notice received from any holder of
Subordinated Debt, or any trustee therefor, or of any default under any
agreement or instrument relating to any Subordinated Debt by reason whereof
such Subordinated Debt might become or be declared to be due or payable.
Section 6.11 INVESTMENTS. The Borrower will not, and will not permit any
Subsidiary to, acquire for value, make, have or hold any Investments, except:
6.11(a) Investments existing on the date of this Agreement.
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6.11(b) Travel advances to management personnel and employees in the
ordinary course of business.
6.11(c) Investments in readily marketable direct obligations issued
or guaranteed by the United States or any agency thereof and supported by
the full faith and credit of the United States.
6.11(d) Certificates of deposit or bankers' acceptances issued by
any commercial bank organized under the laws of the United States or any
State thereof which has (i) combined capital and surplus of at least
$100,000,000, and (ii) a credit rating with respect to its unsecured
indebtedness from a nationally recognized rating service that is
satisfactory to the Agent.
6.11(e) Commercial paper given the highest rating by a nationally
recognized rating service.
6.11(f) Repurchase agreements relating to securities issued or
guaranteed as to principal and interest by the United States of America.
6.11(g) Other readily marketable Investments in debt securities
which are reasonably acceptable to the Majority Banks.
6.11(h) Capital Expenditures permitted under Section 6.9.
6.11(i) Investments in the Subsidiaries as of the date of this
Agreement and Investments in Subsidiaries acquired or formed after the
date hereof in accordance with Section 6.21.
6.11(j) Any other Investments if the aggregate consideration
therefor does not exceed $500,000 in any fiscal year.
Any Investments under clauses (c), (d), (e) or (f) above must mature within one
year of the acquisition thereof by the Borrower or a Subsidiary.
Section 6.12 INDEBTEDNESS. The Borrower will not, and will not permit
any Subsidiary to, incur, create, issue, assume or suffer to exist any
Indebtedness, except:
6.12(a) The Obligations.
6.12(b) Liabilities, other than for borrowed money, incurred in the
ordinary course of business.
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6.12(c) Indebtedness existing on the date of this Agreement and
disclosed on Exhibit 6.12 hereto, but not including any extension or
refinancing thereof.
6.12(d) Indebtedness secured by Liens permitted under Section 6.13
hereof.
6.12(e) Other Indebtedness not to exceed $750,000 in aggregate
principal amount at any time outstanding.
Section 6.13 LIENS. The Borrower will not, and will not permit any
Subsidiary to, create, incur, assume or suffer to exist any Lien, or enter
into, or make any commitment to enter into, any arrangement for the acquisition
of any property through conditional sale, lease-purchase or other title
retention agreements, with respect to any property now owned or hereafter
acquired by the Borrower or a Subsidiary, except:
6.13(a) Liens granted to the Agent and the Banks under the Security
Documents to secure the Obligations.
6.13(b) Liens existing on the date of this Agreement and disclosed
on Exhibit 6.13 hereto.
6.13(c) Deposits or pledges to secure payment of workers'
compensation, unemployment insurance, old age pensions or other social
security obligations, in the ordinary course of business of the Borrower
or a Subsidiary.
6.13(d) Liens for taxes, fees, assessments and governmental charges
not delinquent or to the extent that payment therefor shall not at the
time be required to be made in accordance with the provisions of Section
5.4.
6.13(e) Liens of carriers, warehousemen, mechanics and materialmen,
and other like Liens arising in the ordinary course of business, for sums
not due or to the extent that payment therefor shall not at the time be
required to be made in accordance with the provisions of Section 5.4.
6.13(f) Liens incurred or deposits or pledges made or given in
connection with, or to secure payment of, indemnity, performance or other
similar bonds.
6.13(g) Liens arising solely by virtue of any statutory or common
law provision relating to banker's liens, rights of set-off or similar
rights and remedies as to deposit accounts or other funds maintained with
a creditor
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depository institution; PROVIDED THAT (i) such deposit account is not
a dedicated cash collateral account and is not subject to restriction
against access by the Borrower or a Subsidiary in excess of those set
forth by regulations promulgated by the Board, and (ii) such deposit
account is not intended by the Borrower or any Subsidiary to provide
collateral to the depository institution.
6.13(h) Encumbrances in the nature of zoning restrictions, easements
and rights or restrictions of record on the use of real property and
landlord's Liens under leases on the premises rented, which do not
materially detract from the value of such property or impair the use
thereof in the business of the Borrower or a Subsidiary.
6.13(i) The interest of any lessor under any Capitalized Lease
entered into after the Closing Date or purchase money Liens on property
acquired after the Closing Date; provided, that, (i) the Indebtedness
secured thereby is otherwise permitted by this Agreement and (ii) such
Liens are limited to the property acquired and do not secure Indebtedness
other than the related Capitalized Lease Obligations or the purchase price
of such property.
Section 6.14 CONTINGENT LIABILITIES. The Borrower will not, and will not
permit any Subsidiary to, be or become liable on any Contingent Obligations
except Contingent Obligations existing on the date of this Agreement and
described on Exhibit 6.14 and except for guaranties by the Borrower or a
Subsidiary of the Indebtedness of a Subsidiary if such Indebtedness is
permitted to be incurred by such Subsidiary under Section 6.12.
Section 6.15 TANGIBLE NET WORTH. The Borrower will not permit its
Tangible Net Worth to be less than: (a) as of the last day of the Borrower's
1997 fiscal year, an amount equal to the sum of (i) $50,551,000 plus (ii) 75%
of the cumulative consolidated net income of the Borrower and the Subsidiaries,
if positive, for the period from the beginning of the 1997 fiscal year to the
last day of the 1997 fiscal year; (b) as of the last day of any fiscal quarter
in the 1998 fiscal year, an amount equal to the sum of (i) the minimum Tangible
Net Worth requirement determined under the preceding clause (a) as of the last
day of the 1997 fiscal year plus (ii) 75% of the cumulative consolidated net
income of the Borrower and the Subsidiaries, if positive, for the period from
the beginning of the 1998 fiscal year to the last day of such fiscal quarter;
(c) as of the last day of any fiscal quarter in the 1999 fiscal year, an amount
equal to the sum of (i) the minimum Tangible Net Worth requirement determined
under the preceding clause (b) as of the last day of the 1998 fiscal year plus
(ii) 75% of the cumulative consolidated net income of the Borrower and the
Subsidiaries, if positive, for the period from the beginning of the 1999 fiscal
year to the last day of such fiscal quarter; and (d) as of the last day of any
fiscal quarter in the 2000 fiscal year, an amount equal to the sum of (i) the
minimum Tangible Net Worth requirement determined under the preceding clause
(c) as of the last day of
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the 1999 fiscal plus (ii) 75% of the cumulative consolidated net income of
the Borrower and the Subsidiaries, if positive, for the period from the
beginning of the 2000 fiscal year to the last day of such fiscal quarter.
Section 6.16 FIXED CHARGE COVERAGE RATIO. The Borrower will not permit
the Fixed Charge Coverage Ratio, as of any date set forth below, for the four
consecutive fiscal quarters ending on that date, to be less than the ratio set
opposite that date:
FOUR-QUARTER MINIMUM FIXED CHARGE
PERIOD ENDING COVERAGE RATIO
------------- --------------------
12/31/97, 3/31/98,
6/30/98 and 9/30/98 1.10 to 1.00
12/31/98 and thereafter 1.20 to 1.00
Section 6.17 RATIO OF TOTAL FUNDED DEBT TO EBITDA. The Borrower will not
permit the ratio of Total Funded Debt to EBITDA as of the last day of any
fiscal quarter, commencing December 31, 1997, for the period of four consecutive
fiscal quarters ending on that day, to exceed 3.00 to 1.00.
Section 6.18 TRADE SUPPORT RATIO. The Borrower will not permit the ratio
of (a) its trade accounts payable to inventory vendors TO (b) its inventory as
of the last day of any fiscal quarter, commencing December 31, 1997, to be less
than 0.475 to 1.00.
Section 6.19 EBITDA. The Borrower will not permit EBITDA as of the last
day of any fiscal quarter, commencing December 31, 1997, for the period of four
consecutive fiscal quarters ending on such day, to be less than $12,000,000.
Section 6.20 LOAN PROCEEDS. The Borrower will not, and will not permit
any Subsidiary to, use any part of the proceeds of any Loan or Advances
directly or indirectly, and whether immediately, incidentally or ultimately,
(a) to purchase or carry margin stock (as defined in Regulation U of the Board)
or to extend credit to others for the purpose of purchasing or carrying margin
stock or to refund Indebtedness originally incurred for such purpose or (b) for
any purpose which entails a violation of, or which is inconsistent with, the
provisions of Regulations G, U or X of the Board.
Section 6.21 SUBSIDIARIES. After the date of this Agreement, the
Borrower will not, and will not permit any Subsidiary to, form or acquire any
corporation which would thereby become a Subsidiary unless:
(a) 100% of the shares of capital stock of such Subsidiary are
owned by the Borrower directly or indirectly through one or more
Subsidiaries 100% of the capital stock of each of which is owned either
directly or indirectly by the
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Borrower and which shares have been pledged to the Bank as required by
clause (b) of this Section 6.21;
(b) 100% of the shares of capital stock of such Subsidiary are
pledged to the Bank either under the Pledge Agreement, if such shares are
owned directly by the Borrower, or under a Guarantor Pledge Agreement to
be executed by the immediate parent of such Subsidiary, if such shares are
owned by the Borrower through one or more Subsidiaries as described in
clause (a) of this Section 6.21;
(c) such Subsidiary executes and delivers to the Bank (i) a
Guaranty, (ii) a Guarantor Pledge Agreement (if such Subsidiary owns the
shares of another Subsidiary), and (iii) a Guarantor Security Agreement;
(d) the Borrower, such Subsidiary and, if applicable, the parent of
such Subsidiary execute and deliver any and all amendments to the Security
Documents, any and all Uniform Commercial Code financing statements or
amendments thereto and any other instruments and documents which the Agent
may require to establish, evidence and/or perfect any security interest
granted to the Agent pursuant to this Section 6.21, all of which shall be
in form and substance satisfactory to the Agent.
If any portion of the property which is subject to the lien of the Mortgage is
transferred to a Subsidiary, such Subsidiary shall at the time and as a
condition of such transfer, execute and deliver to the Agent for the benefit of
the Banks a Guarantor Mortgage covering such property, and the provisions of
Section 7.4 relating to the recording of the Mortgage and the obtaining of a
land survey, a mortgagee's policy of title insurance, and an environmental
survey shall be applicable to such Guarantor Mortgage and the property covered
thereby.
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.1 EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an Event of Default:
7.1(a) The Borrower shall fail to make when due, whether by
acceleration or otherwise, any payment of principal of or interest on any
Note or any other Obligation required to be made to the Agent or any Bank
pursuant to this Agreement and such failure shall continue for five (5)
calendar days.
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7.1(b) Any representation or warranty made by or on behalf of the
Borrower or any Subsidiary in this Agreement or any other Loan Document or
by or on behalf of the Borrower or any Subsidiary in any certificate,
statement, report or document herewith or hereafter furnished to any Bank
or the Agent pursuant to this Agreement or any other Loan Document shall
prove to have been false or misleading in any material respect on the date
as of which the facts set forth are stated or certified.
7.1(c) The Borrower shall fail to comply with Sections 5.2 or 5.3
hereof or any Section of Article VI hereof.
7.1(d) The Borrower shall fail to comply with any other agreement,
covenant, condition, provision or term contained in this Agreement (other
than those hereinabove set forth in this Section 7.1) and such failure to
comply shall continue for 30 calendar days after whichever of the
following dates is the earliest: (i) the date the Borrower gives notice
of such failure to the Banks, (ii) the date the Borrower should have given
notice of such failure to the Banks pursuant to Section 5.1, or (iii) the
date the Agent or any Bank gives notice of such failure to the Borrower.
7.1(e) Any default (however denominated or defined) shall occur
under any Security Document or under any Mortgage or Indemnification
Agreement provided by the Borrower pursuant to Section 7.4 and such
default is not cured within any applicable grace period provided for
therein.
7.1(f) The Borrower or any Subsidiary shall become insolvent or
shall generally not pay its debts as they mature or shall apply for, shall
consent to, or shall acquiesce in the appointment of a custodian, trustee
or receiver of the Borrower or any Subsidiary or for a substantial part of
the property thereof or, in the absence of such application, consent or
acquiescence, a custodian, trustee or receiver shall be appointed for the
Borrower or a Subsidiary or for a substantial part of the property thereof
and shall not be discharged within 45 days, or the Borrower or any
Subsidiary shall make an assignment for the benefit of creditors.
7.1(g) Any bankruptcy, reorganization, debt arrangement or other
proceedings under any bankruptcy or insolvency law shall be instituted by
or against the Borrower or any Subsidiary, and, if instituted against the
Borrower or any Subsidiary, shall have been consented to or acquiesced in
by the Borrower or such Subsidiary, or shall remain undismissed for 60
days, or an order for relief shall have been entered against the Borrower
or such Subsidiary.
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7.1(h) Any dissolution or liquidation proceeding not permitted by
Section 6.1 shall be instituted by or against the Borrower or a
Subsidiary, and, if instituted against the Borrower or any Subsidiary,
shall be consented to or acquiesced in by the Borrower or such Subsidiary
or shall remain for 45 days undismissed.
7.1(i) A judgment or judgments for the payment of money in excess
of the sum of $500,000 in the aggregate shall be rendered against the
Borrower or a Subsidiary and either (i) the judgment creditor executes on
such judgment or (ii) such judgment remains unpaid or undischarged for
more than 60 days from the date of entry thereof or such longer period
during which execution of such judgment shall be stayed during an appeal
from such judgment.
7.1(j) The maturity of any material Indebtedness of the Borrower
(other than Indebtedness under this Agreement) or a Subsidiary shall be
accelerated, or the Borrower or a Subsidiary shall fail to pay any such
material Indebtedness when due (after the lapse of any applicable grace
period) or, in the case of such Indebtedness payable on demand, when
demanded (after the lapse of any applicable grace period), or any event
shall occur or condition shall exist and shall continue for more than the
period of grace, if any, applicable thereto and shall have the effect of
causing, or permitting the holder of any such Indebtedness or any trustee
or other Person acting on behalf of such holder to cause, such material
Indebtedness to become due prior to its stated maturity or to realize upon
any collateral given as security therefor. For purposes of this Section,
Indebtedness of the Borrower or a Subsidiary shall be deemed "material" if
it exceeds $500,000 as to any item of Indebtedness or in the aggregate for
all items of Indebtedness with respect to which any of the events described
in this Section 7.1(j) has occurred.
7.1(k) Any execution or attachment shall be issued whereby property
of the Borrower or any Subsidiary having either a market value or a book
value of $500,000 or more shall be taken or attempted to be taken and the
same shall not have been vacated or stayed within 30 days after the
issuance thereof.
7.1(l) Any Security Document or any Mortgage or Indemnification
Agreement provided by the Borrower pursuant to Section 7.4 shall, at any
time, cease to be in full force and effect or shall be judicially declared
null and void, or the validity or enforceability thereof shall be contested
by the Borrower, or the Agent or the Banks shall cease to have a valid and
perfected security interest having the priority contemplated thereunder in
all of the collateral described therein, other than by action or inaction
of the Agent or the Banks if (i) the aggregate value of the collateral
affected by any of the foregoing exceeds $500,000
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and (ii) any of the foregoing shall remain unremedied for ten days or more
after receipt of notice thereof by the Borrower from the Agent.
7.1(m) Any Change of Control shall occur.
Section 7.2 REMEDIES. If (a) any Event of Default described in Sections
7.1(f), (g) or (h) shall occur, the Commitments shall automatically terminate
and the Notes and all other Obligations shall automatically become immediately
due and payable, and the Borrower shall without demand pay into the Holding
Account an amount equal to the aggregate face amount of all outstanding Letters
of Credit; or (b) any other Event of Default shall occur and be continuing,
then, upon receipt by the Agent of a request in writing from the Majority
Banks, the Agent shall take any of the following actions so requested: (i)
declare the Commitments terminated, whereupon the Commitments shall terminate,
(ii) declare the outstanding unpaid principal balance of the Notes, the accrued
and unpaid interest thereon and all other Obligations to be forthwith due and
payable, whereupon the Notes, all accrued and unpaid interest thereon and all
such Obligations shall immediately become due and payable, in each case without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived, anything in this Agreement or in the Notes to the
contrary notwithstanding, and (iii) demand that the Borrower pay into the
Holding Account an amount equal to the aggregate face amount of all outstanding
Letters of Credit. Upon the occurrence of any of the events described in
clause (a) of the preceding sentence, or upon the occurrence of any of the
events described in clause (b) of the preceding sentence when so requested by
the Majority Banks, the Agent may exercise all rights and remedies under any of
the Loan Documents, and enforce all rights and remedies under any applicable
law.
Section 7.3 OFFSET. In addition to the remedies set forth in Section
7.2, upon the occurrence of any Event of Default and thereafter while the same
be continuing, the Borrower hereby irrevocably authorizes each Bank to set off
any Obligations owed to such Bank against all deposits and credits of the
Borrower with, and any and all claims of the Borrower against, such Bank. Such
right shall exist whether or not such Bank shall have made any demand hereunder
or under any other Loan Document, whether or not the Obligations, or any part
thereof, or deposits and credits held for the account of the Borrower is or are
matured or unmatured, and regardless of the existence or adequacy of any
collateral, guaranty or any other security, right or remedy available to such
Bank or the Banks. Each Bank agrees that, as promptly as is reasonably
possible after the exercise of any such setoff right, it shall notify the
Borrower of its exercise of such setoff right; provided, however, that the
failure of such Bank to provide such notice shall not affect the validity of
the exercise of such setoff rights. Nothing in this Agreement shall be deemed
a waiver or prohibition of or restriction on any Bank to all rights of banker's
Lien, setoff and counterclaim available pursuant to law.
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Section 7.4 RECORDING OF MORTGAGE. The parties hereto acknowledge that
the Agent shall not cause the Mortgage to be recorded unless and until an Event
of Default has occurred under Section 6.19. Upon the occurrence of an Event of
Default under Section 6.19, the Agent, after consulting with the Banks and
unless directed not to do so by the Majority Banks, shall cause, and the
Borrower shall permit: (a) the Mortgage to be recorded, (b) a land survey to
be made of the property subject to the Mortgage (the "Mortgaged Property"), (c)
a mortgagee's policy of title insurance to be issued with respect to the
Mortgage and the Mortgaged Property, (d) an appraisal to be made of the
Mortgaged Property and (e) an environmental survey to be made of the Mortgaged
Property, which land survey, policy of title insurance, appraisal and
environmental survey shall be in form, substance and detail satisfactory to the
Agent. All mortgage registry tax, recording fees and other costs in connection
with the recording of the Mortgage, and all fees and costs in connection with
the preparation and issuance of any such land survey, title insurance policy,
appraisal and/or environmental survey shall be at the expense of the Borrower,
and the Borrower shall, upon demand by the Agent, promptly pay such fees and
costs or, if such fees and costs have been paid by the Banks, promptly
reimburse the Banks therefor.
ARTICLE VIII
THE AGENT
The following provisions shall govern the relationship of the Agent with
the Banks and shall inure to the benefit only of the Agent and the Banks, and
not of the Borrower.
Section 8.1 APPOINTMENT AND AUTHORIZATION. Each Bank appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such respective powers under the Loan Documents as are delegated to the Agent
by the terms thereof, together with such powers as are reasonably incidental
thereto. Neither the Agent nor any of its directors, officers or employees
shall be liable for any action taken or omitted to be taken by it under or in
connection with the Loan Documents, the Letters of Credit, except for its own
gross negligence or willful misconduct. The Agent shall act as an independent
contractor in performing its obligations as Agent hereunder and nothing herein
contained shall be deemed to create any fiduciary relationship among or between
the Agent, the Borrower or the Banks.
Section 8.2 NOTE HOLDERS. The Agent may treat the payee of any Note as
the holder thereof until written notice of transfer shall have been filed with
it, signed by such payee and in form satisfactory to the Agent.
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Section 8.3 CONSULTATION WITH COUNSEL. The Agent may consult with legal
counsel selected by it and shall not be liable for any action taken or suffered
in good faith by it in accordance with the advice of such counsel.
Section 8.4 LOAN DOCUMENTS. The Agent shall not be under a duty to
examine or pass upon the validity, effectiveness, genuineness or value of any
of the Loan Documents or any other instrument or document furnished pursuant
thereto, and the Agent shall be entitled to assume that the same are valid,
effective and genuine and what they purport to be.
Section 8.5 U.S. BANK AND AFFILIATES. With respect to its Commitment and
the Loans made by it, U.S. Bank shall have the same rights and powers under the
Loan Documents as any other Bank and may exercise the same as though it were
not the Agent consistent with the terms thereof, and U.S. Bank and its
Affiliates may accept deposits from, lend money to and generally engage in any
kind of business with the Borrower as if it were not the Agent.
Section 8.6 ACTION BY AGENT. Except as may otherwise be expressly stated
in this Agreement, the Agent shall be entitled to use its discretion with
respect to exercising or refraining from exercising any rights which may be
vested in it by, or with respect to taking or refraining from taking any action
or actions which it may be able to take under or in respect of, the Loan
Documents. The Agent shall be required to act or to refrain from acting (and
shall be fully protected in so acting or refraining from acting) upon the
instructions of the Majority Banks, and such instructions shall be binding upon
all holders of Notes; provided, however, that the Agent shall not be required
to take any action which exposes the Agent to personal liability or which is
contrary to the Loan Documents or applicable law. The Agent shall incur no
liability under or in respect of any of the Loan Documents by acting upon any
notice, consent, certificate, warranty or other paper or instrument believed by
it to be genuine or authentic or to be signed by the proper party or parties
and to be consistent with the terms of this Agreement.
Section 8.7 CREDIT ANALYSIS. Each Bank has made, and shall continue to
make, its own independent investigation or evaluation of the operations,
business, property and condition, financial and otherwise, of the Borrower in
connection with entering into this Agreement and has made its own appraisal of
the creditworthiness of the Borrower. Except as explicitly provided herein,
the Agent has no duty or responsibility, either initially or on a continuing
basis, to provide any Bank with any credit or other information with respect to
such operations, business, property, condition or creditworthiness, whether
such information comes into its possession on or before the first Event of
Default or at any time thereafter.
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Section 8.8 NOTICES OF EVENT OF DEFAULT, ETC. In the event that the
Agent shall have acquired actual knowledge of any Event of Default or Default,
the Agent shall promptly give notice thereof to the Banks.
Section 8.9 INDEMNIFICATION. Each Bank agrees to indemnify the Agent, as
Agent (to the extent not reimbursed by the Borrower), ratably according to such
Bank's share of the aggregate Commitment Amounts from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on or incurred by the Agent in any way relating to or arising
out of the Loan Documents or any action taken or omitted by the Agent under the
Loan Documents, provided that no Bank shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from the Agent's gross
negligence or willful misconduct. No payment by any Bank under this Section
shall relieve the Borrower of any of its obligations under this Agreement.
Section 8.10 PAYMENTS AND COLLECTIONS. All funds received by the Agent
in respect of any payments made by the Borrower on the Notes, Commitment Fees
or Letter of Credit Fees shall be distributed forthwith by the Agent among the
Banks, in like currency and funds as received, ratably according to each Bank's
Commitment Percentage. After any Event of Default has occurred, all funds
received by the Agent, whether as payments by the Borrower or as realization on
collateral or on any guaranties, shall (except as may otherwise be required by
law) be distributed by the Agent in the following order: (a) first to the
Agent or any Bank who has incurred unreimbursed costs of collection with
respect to any Obligations hereunder, ratably to the Agent and each Bank in the
proportion that the costs incurred by the Agent or such Bank bear to the total
of all such costs incurred by the Agent and all Banks; (b) next to the Agent
for the account of the Banks (in accordance with their respective Commitment
Percentages) for application on the Notes (such application to be made first to
the payment of interest and then to the payment of principal); (c) next to the
Agent for the account of the Banks (in accordance with their respective
Commitment Percentages) for any unpaid Commitment Fees, Standby Letter of
Credit Fees or other fees owing by the Borrower hereunder (other than the fees
payable to the Agent for its own account, as described in the last sentence of
Section 2.17, which shall be retained by the Agent for its own account); and
(d) last to the Agent to be held in the Holding Account to cover any
outstanding Letters of Credit.
Section 8.11 SHARING OF PAYMENTS. If any Bank shall receive and retain
any payment, voluntary or involuntary, whether by setoff, application of
deposit balance or security, or otherwise, in respect of Indebtedness under
this Agreement or the Notes in excess of such Bank's share thereof as
determined under this Agreement, then such Bank shall purchase from the other
Banks for cash and at face value and without recourse, such participation in
the Notes held by such other Banks as shall
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be necessary to cause such excess payment to be shared ratably as aforesaid
with such other Banks; provided, that if such excess payment or part thereof
is thereafter recovered from such purchasing Bank, the related purchases from
the other Banks shall be rescinded ratably and the purchase price restored as
to the portion of such excess payment so recovered, but without interest.
Subject to the participation purchase obligation above, each Bank agrees to
exercise any and all rights of setoff, counterclaim or banker's lien first
fully against any Notes and participations therein held by such Bank, next to
any other Indebtedness of the Borrower to such Bank arising under or pursuant
to this Agreement and to any participations held by such Bank in Indebtedness
of the Borrower arising under or pursuant to this Agreement, and only then to
any other Indebtedness of the Borrower to such Bank.
Section 8.12 ADVICE TO BANKS. The Agent shall forward to the Banks
copies of all notices, financial reports and other communications received
hereunder from the Borrower by it as Agent, excluding, however, notices,
reports and communications which by the terms hereof are to be furnished by
the Borrower directly to each Bank.
Section 8.13 RESIGNATION. If at any time U.S. Bank shall deem it
advisable, in its sole discretion, it may submit to each of the Banks and the
Borrower a written notification of its resignation as Agent under this
Agreement, such resignation to be effective upon the appointment of a
successor Agent, but in no event later than 30 days from the date of such
notice. Upon submission of such notice, the Majority Banks may appoint a
successor Agent.
ARTICLE IX
MISCELLANEOUS
Section 9.1 MODIFICATIONS. Notwithstanding any provisions to the
contrary herein, any term of this Agreement may be amended with the written
consent of the Borrower; provided that no amendment, modification or waiver
of any provision of this Agreement or any other Loan Document or consent to
any departure therefrom by the Borrower or other party thereto shall in any
event be effective unless the same shall be in writing and signed by the
Majority Banks, and then such amendment, modification, waiver or consent
shall be effective only in the specific instance and for the purpose for
which given. (The Agent may enter into amendments or modifications of, and
grant consents and waivers to departure from the provisions of, those Loan
Documents to which the Banks are not signatories without the Banks joining
therein, PROVIDED the Agent has first obtained the separate prior written
consent to such amendment, modification, consent or waiver from the Majority
Banks.) Notwithstanding the forgoing, no such amendment, modification,
waiver or consent shall:
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9.1(a) Reduce the rate or extend the time of payment of interest
thereon, or reduce the amount of the principal thereof, or modify any of
the provisions of any Note with respect to the payment or repayment
thereof, without the consent of the holder of each Note so affected; or
9.1(b) Increase or decrease (except in accordance with Section
2.14) the amount or extend the time of the Commitment of any Bank, without
the consent of such Bank; or
9.1(c) Reduce the rate or extend the time of payment of any fee
payable to a Bank, without the consent of the Bank affected; or
9.1(d) Except as may otherwise be expressly provided in any of the
other Loan Documents, release any material portion of collateral securing,
or any guaranties for, all or any part of the Obligations without the
consent of all the Banks; or
9.1(e) Amend the definition of Majority Banks or otherwise reduce
the percentage of the Banks required to approve or effectuate any such
amendment, modification, waiver, or consent, without the consent of all
the Banks; or
9.1(f) Amend any of the foregoing Sections 9.1 (a) through (e) or
this Section 9.1 (f) without the consent of all the Banks; or
9.1(g) Amend any provision of this Agreement relating to the Agent
in its capacity as Agent without the consent of the Agent; or
9.1(h) Amend any provision of this Agreement relating to the
issuance of Letters of Credit without the consent of the Agent.
Section 9.2 EXPENSES. Whether or not the transactions contemplated
hereby are consummated, the Borrower agrees to reimburse the Agent upon
demand for all reasonable out-of-pocket expenses paid or incurred by the
Agent (including filing and recording costs and fees and expenses of Xxxxxx &
Xxxxxxx LLP, counsel to the Agent) in connection with the negotiation,
preparation, approval, review, execution, delivery, administration,
amendment, modification and interpretation of this Agreement and the other
Loan Documents and any commitment letters relating thereto. The Borrower
shall also reimburse the Agent and each Bank upon demand for all reasonable
out-of-pocket expenses (including expenses of legal counsel) paid or incurred
by the Agent or any Bank in connection with the collection and enforcement of
this Agreement and any other Loan Document. The obligations of the Borrower
under this Section shall survive any termination of this Agreement.
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Section 9.3 WAIVERS, ETC. No failure on the part of the Agent or the
holder of a Note to exercise and no delay in exercising any power or right
hereunder or under any other Loan Document shall operate as a waiver thereof;
nor shall any single or partial exercise of any power or right preclude any
other or further exercise thereof or the exercise of any other power or right.
The remedies herein and in the other Loan Documents provided are cumulative and
not exclusive of any remedies provided by law.
Section 9.4 NOTICES. Except when telephonic notice is expressly
authorized by this Agreement, any notice or other communication to any party in
connection with this Agreement shall be in writing and shall be sent by manual
delivery, telegram, telex, facsimile transmission, overnight courier or United
States mail (postage prepaid) addressed to such party at the address specified
on the signature page hereof, or at such other address as such party shall have
specified to the other party hereto in writing. All periods of notice shall be
measured from the date of delivery thereof if manually delivered, from the date
of sending thereof if sent by telegram, telex or facsimile transmission, from
the first Business Day after the date of sending if sent by overnight courier,
or from four days after the date of mailing if mailed; provided, however, that
any notice to the Agent or any Bank under Article II hereof shall be deemed to
have been given only when received by the Agent or such Bank.
Section 9.5 TAXES. The Borrower agrees to pay, and save the Agent and
the Banks harmless from all liability for, any stamp or other taxes which may
be payable with respect to the execution or delivery of this Agreement or the
issuance of the Notes, which obligation of the Borrower shall survive the
termination of this Agreement.
Section 9.6 SUCCESSORS AND ASSIGNS; DISPOSITION OF LOANS; TRANSFEREES.
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, except that the Borrower
may not assign its rights or delegate its obligations hereunder or under any
other Borrower Loan Document without the prior written consent of all the
Banks. Each Bank may at any time sell, assign, transfer, grant participations
in, or otherwise dispose of any portion of its Commitments, the Loans and/or
Advances (each such interest so disposed of being herein called a "Transferred
Interest") to banks or other financial institutions ("Transferees"); PROVIDED,
HOWEVER, that a Bank may dispose of a Transferred Interest only (a) in minimum
amounts of $5,000,000, with respect to the assignment of a portion of a Bank's
Commitment Amount, (b) with the consent of the Agent and the Borrower (which
consent shall not, in either case, be unreasonably withheld, and provided that
the consent of the Borrower shall not be required if an Event of Default has
occurred which is continuing), (c) upon payment to the Agent by the parties to
such disposition of a processing and recording fee in the amount of $2,500 for
each party and (d) upon executing and delivering, and upon causing each
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Transferee to execute and deliver, to the Agent a form of assumption
agreement assuming and agreeing to be bound by the terms and provisions of
this Agreement and the other Loan Documents and which is otherwise in form
and substance satisfactory to the Agent. Without limiting the obligations of
the Banks and the Transferees under the preceding sentence, each Transferee,
by its acceptance of its Transferred Interest, shall be deemed to have become
bound by the terms and provisions of this Agreement and the other Loan
Documents. The Borrower agrees that each Transferee shall be entitled to
the benefits of Sections 2.22, 2.23, 2.24, 2.25, 2.26, 2.27, 2.28 and 9.2
with respect to its Transferred Interest and that each Transferee may
exercise any and all rights of banker's Lien, setoff and counterclaim as if
such Transferee were a direct lender to the Borrower. If any Bank makes any
assignment to a Transferee, then upon notice to the Borrower such Transferee,
to the extent of such assignment (unless otherwise provided therein), shall
become a "Bank" hereunder and shall have all the rights and obligations of
such Bank hereunder and under the other Loan Documents, and such Bank shall
be released from its duties and obligations under this Agreement to the
extent of such assignment. Notwithstanding the sale by any Bank of any
participation hereunder, (a) no participant shall be deemed to be or have the
rights and obligations of a Bank hereunder except that any participant shall
have a right of setoff under Section 7.3 as if it were such Bank and the
amount of its participation were owing directly to such participant by the
Borrower and (b) such Bank shall not in connection with selling any such
participation condition such Bank's rights in connection with consenting to
amendments or granting waivers concerning any matter under any Loan Document
upon obtaining the consent of such participant other than on matters relating
to (i) any reduction in the amount of any principal of, or the amount of or
rate of interest on, any Note or Advance in which such participation is sold,
(ii) any postponement of the date fixed for any payment of principal of or
interest on any Note or Advance in which such participation is sold, (iii)
the release or subordination of any material portion of any collateral other
than pursuant to the terms of any Security Document or (iv) the release of
any Guaranty.
Section 9.7 CONFIDENTIALITY OF INFORMATION. The Agent and each Bank
shall use reasonable efforts to assure that information about the Borrower and
its operations, affairs and financial condition, not generally disclosed to the
public or to trade and other creditors, which is furnished to the Agent or such
Bank pursuant to the provisions hereof is used only for the purposes of this
Agreement and any other relationship between any Bank and the Borrower and
shall not be divulged to any Person other than the Banks, their Affiliates and
their respective officers, directors, employees and agents, except: (a) to
their attorneys and accountants, (b) in connection with the enforcement of the
rights of the Banks hereunder and under the Notes and the Security Documents or
otherwise in connection with applicable litigation, (c) in connection with
assignments and participations and the solicitation of prospective assignees
and participants referred to in the immediately preceding Section, and (d) as
may otherwise be required or requested by any regulatory
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authority having jurisdiction over any Bank or by any applicable law, rule,
regulation or judicial process, the opinion of such Bank's counsel concerning
the making of such disclosure to be binding on the parties hereto. No Bank
shall incur any liability to the Borrower by reason of any disclosure
permitted by this Section 9.7.
Section 9.8 GOVERNING LAW AND CONSTRUCTION. THE VALIDITY, CONSTRUCTION
AND ENFORCEABILITY OF THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT TO CONFLICT OF
LAWS PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS OF THE UNITED STATES
APPLICABLE TO NATIONAL BANKS. Whenever possible, each provision of this
Agreement and the other Loan Documents and any other statement, instrument or
transaction contemplated hereby or thereby or relating hereto or thereto shall
be interpreted in such manner as to be effective and valid under such
applicable law, but, if any provision of this Agreement, the other Loan
Documents or any other statement, instrument or transaction contemplated hereby
or thereby or relating hereto or thereto shall be held to be prohibited or
invalid under such applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement, the
other Loan Documents or any other statement, instrument or transaction
contemplated hereby or thereby or relating hereto or thereto.
Section 9.9 CONSENT TO JURISDICTION. AT THE OPTION OF THE AGENT, THIS
AGREEMENT AND THE OTHER BORROWER LOAN DOCUMENTS MAY BE ENFORCED IN ANY FEDERAL
COURT OR MINNESOTA STATE COURT SITTING IN HENNEPIN COUNTY, MINNESOTA; AND THE
BORROWER CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES
ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT THE
BORROWER COMMENCES ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT
OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED
BY THIS AGREEMENT, THE AGENT AT ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE
TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH
TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE
DISMISSED WITHOUT PREJUDICE.
Section 9.10 WAIVER OF JURY TRIAL. EACH OF THE BORROWER , THE AGENT AND
THE BANKS IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
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Section 9.11 SURVIVAL OF AGREEMENT. All representations, warranties,
covenants and agreement made by the Borrower herein or in the other Borrower
Loan Documents and in the certificates or other instruments prepared or
delivered in connection with or pursuant to this Agreement or any other Loan
Document shall be deemed to have been relied upon by the Banks and shall
survive the making of the Loans by the Banks and the execution and delivery
to the Banks by the Borrower of the Notes, regardless of any investigation
made by or on behalf of the Banks, and shall continue in full force and
effect as long as any Obligation is outstanding and unpaid and so long as the
Commitments have not been terminated; provided, however, that the obligations
of the Borrower under Section 9.2, 9.5 and 9.12 shall survive payment in full
of the Obligations and the termination of the Commitments.
Section 9.12 INDEMNIFICATION. The Borrower hereby agrees to defend,
protect, indemnify and hold harmless the Agent and the Banks and their
respective Affiliates and the directors, officers, employees, attorneys and
agents of the Agent and the Banks and their respective Affiliates (each of
the foregoing being an "Indemnitee" and all of the foregoing being
collectively the "Indemnitees") from and against any and all claims, actions,
damages, liabilities, judgments, costs and expenses (including all reasonable
fees and disbursements of counsel which may be incurred in the investigation
or defense of any matter) imposed upon, incurred by or asserted against any
Indemnitee, whether direct, indirect or consequential and whether based on
any federal, state, local or foreign laws or regulations (including
securities laws, environmental laws, commercial laws and regulations), under
common law or on equitable cause, or on contract or otherwise:
(a) by reason of, relating to or in connection with the execution,
delivery, performance or enforcement of any Loan Document, any commitments
relating thereto, or any transaction contemplated by any Loan Document; or
(b) by reason of, relating to or in connection with any credit
extended or used under the Loan Documents or any act done or omitted by
any Person, or the exercise of any rights or remedies thereunder,
including the acquisition of any collateral by the Banks by way of
foreclosure of the Lien thereon, deed or xxxx of sale in lieu of such
foreclosure or otherwise;
provided, however, that the Borrower shall not be liable to any Indemnitee
for any portion of such claims, damages, liabilities and expenses resulting
from such Indemnitee's gross negligence or willful misconduct. In the event
this indemnity is unenforceable as a matter of law as to a particular matter
or consequence referred to herein, it shall be enforceable to the full extent
permitted by law.
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This indemnification applies, without limitation, to any act, omission,
event or circumstance existing or occurring on or prior to the later of the
Termination Date or the date of payment in full of the Obligations, including
specifically Obligations arising under clause (b) of this Section. The
indemnification provisions set forth above shall be in addition to any
liability the Borrower may otherwise have. Without prejudice to the survival
of any other obligation of the Borrower hereunder the indemnities and
obligations of the Borrower contained in this Section shall survive the
payment in full of the other Obligations.
Section 9.13 CAPTIONS. The captions or headings herein and any table
of contents hereto are for convenience only and in no way define, limit or
describe the scope or intent of any provision of this Agreement.
Section 9.14 ENTIRE AGREEMENT. This Agreement and the other Borrower
Loan Documents embody the entire agreement and understanding between the
Borrower, the Agent and the Banks with respect to the subject matter hereof
and thereof. This Agreement supersedes all prior agreements and
understandings relating to the subject matter hereof. Nothing contained in
this Agreement or in any other Loan Document, expressed or implied, is
intended to confer upon any Persons other than the parties hereto any rights,
remedies, obligations or liabilities hereunder or thereunder.
Section 9.15 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and
the same instrument, and any of the parties hereto may execute this Agreement
by signing any such counterpart.
Section 9.16 BORROWER ACKNOWLEDGEMENTS. The Borrower hereby
acknowledges that (a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan Documents, (b)
neither the Agent nor any Bank has any fiduciary relationship to the
Borrower, the relationship being solely that of debtor and creditor, (c) no
joint venture exists between the Borrower and the Agent or any Bank, and (d)
neither the Agent nor any Bank undertakes any responsibility to the Borrower
to review or inform the Borrower of any matter in connection with any phase
of the business or operations of the Borrower and the Borrower shall rely
entirely upon its own judgment with respect to its business, and any review,
inspection or supervision of, or information supplied to, the Borrower by the
Agent or any Bank is for the protection of the Banks and neither the Borrower
nor any third party is entitled to rely thereon.
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PART TWO
EFFECTIVENESS OF THIS CREDIT AGREEMENT
This Amended and Restated Credit Agreement shall not become effective
until, and shall become effective when, each of the following conditions
precedent shall have been satisfied:
1. The Agent shall have received the following, each in form and
substance satisfactory to the Agent:
(a) Counterparts of this Agreement, duly executed by the Borrower
and the Banks.
(b) A First Amendment to Security Agreement in the form of
Attachment 1(b) hereto, duly executed by the Borrower (the "First
Amendment to Security Agreement").
(c) A Second Amendment and Supplement to Pledge Agreement in the
form of Attachment 1(c) hereto, duly executed by the Borrower (the "Second
Amendment to Pledge Agreement").
(d) A First Amendment to Mortgage, Security Agreement, Assignment
of Leases and Rents and Fixture Financing Statement in the form of
Attachment 1(d) hereto, duly executed by the Borrower (the "First
Amendment to Mortgage").
(e) A First Amendment to Collateral Assignment of Trademarks in the
form of Attachment 1(e) hereto, duly executed by the Borrower (the "First
Amendment to Trademark Assignment").
(f) A First Amendment to Indemnification Agreement in the form of
Attachment 1(f) hereto, duly executed by the Borrower (the "First
Amendment to Indemnification Agreement").
(g) A separate Consent and Agreement of Guarantor from each
Existing Guarantor in the form of Attachment 1(g) hereto, duly executed
by such Guarantor (the "Guarantor Consents").
(h) A copy of the corporate resolutions of the Borrower authorizing
the execution, delivery and performance by such Borrower of this Agreement
and the other documents required to be executed by the Borrower pursuant
to this Part Two, certified by the Secretary or an Assistant Secretary of
the Borrower.
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(i) An incumbency certificate showing the names and titles, and
bearing the signatures of, the officers of the Borrower authorized to
execute, on behalf of the Borrower, this Agreement and the other documents
required to be executed by the Borrower pursuant to this Part Two,
certified by the Secretary or an Assistant Secretary of the Borrower.
(j) A copy of the Articles of Incorporation of the Borrower with
all amendments thereto, certified by the Secretary or an Assistant
Secretary of the Borrower.
(k) A copy of the Bylaws of the Borrower, certified as of the
Closing Date by the Secretary or an Assistant Secretary of the Borrower.
(l) A certificate of good standing for such Borrower in the State
of Minnesota, certified by the Minnesota Secretary of State as of a date
not more than 10 days prior to the Closing Date.
(m) A copy of the corporate resolutions of each Guarantor
authorizing the execution, delivery and performance by such Guarantor of
the documents required to be executed by such Guarantor pursuant to this
Part Two, certified by the Secretary or an Assistant Secretary of such
Guarantor.
(n) An incumbency certificate showing the names and titles, and
bearing the signatures of, the officers of each Guarantor authorized to
execute, on behalf of such Guarantor, the documents required to be
executed by the such Guarantor pursuant to this Part Two, certified by the
Secretary or an Assistant Secretary of such Guarantor.
(o) A copy of the Articles of Incorporation of each Guarantor with
all amendments thereto, certified by the Secretary or an Assistant
Secretary of such Guarantor.
(p) A copy of the Bylaws of each Guarantor, certified as of the
Closing Date by the Secretary or an Assistant Secretary of such Guarantor.
(q) A certificate of good standing for each Guarantor in the
jurisdiction of such Guarantor's incorporation, certified by an appropriate
officer of such Guarantor as of a date not more than 10 days prior to the
Closing Date.
(r) An opinion of counsel to the Borrowers and the Guarantors
covering the matters set forth in Attachment 1(r) hereto.
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(s) Payment of all fees and expenses of the Bank (including the
fees, service charges and disbursements of counsel to the Bank) payable to
the Bank hereunder or under the Existing Credit Agreement.
(t) A Certificate of the Chief Executive Officer, the Chief
Financial Officer, or the Director of Treasury of the Borrower certifying
as to the matters set forth in Sections 3.1(a) and 3.1(b) of this Amended
and Restated Credit Agreement.
(u) Such other documents, certificates and opinions as the Agent
may reasonably request, including without limitation such further
amendments to the Loan Documents
2. Each Bank shall have received a Promissory Note in the form of 1.1-C
hereto, dated the date hereof, made payable to such Bank in the amount of it
Commitment Amount and duly executed by the Borrower, which Promissory Note
shall, in the case of each Existing Bank, constitute an amendment and
restatement of its Existing Note.
Upon receipt by the Agent and the Banks of the items required under
paragraphs 1 and 2 of this Part Two: (i) each Existing Bank shall surrender
to the Borrower such Existing Bank's Existing Note, marked "renewed but not
paid" or words to similar effect; (ii) the unpaid principal balance
outstanding under such Existing Note, and the interest accrued but unpaid
thereon, shall be outstanding under such Bank's Revolving Note delivered
pursuant to paragraph 2 of this Part Two; (iii) all references to the "Credit
Agreement" contained in the Existing Security Agreement (as amended by the
First Amendment to Security Agreement), the Existing Pledge Agreement (as
amended by the Second Amendment to Pledge Agreement), the Existing Mortgage
(as amended by the First Amendment to Mortgage), the Existing Trademark
Assignment (as amended by the First Amendment to Trademark Assignment), the
Existing Indemnification Agreement (as amended by the First Amendment to
Indemnification Agreement), the Existing Guaranties (as amended by the
Guarantor Consents) and the Existing Guarantor Security Agreements (as
amended by the Guarantor Consents) shall be deemed to mean this Agreement, as
this Agreement may hereafter be amended, supplemented, restated or otherwise
modified in writing by the Borrower, the Banks and the Agent from time to
time; and (iv) all references to the "Banks" contained in this Agreement, the
Existing Security Agreement (as amended by the First Amendment to Security
Agreement), the Existing Pledge Agreement (as amended by the Second Amendment
to Pledge Agreement), the Existing Mortgage (as amended by the First
Amendment to Mortgage), the Existing Trademark Assignment (as amended by the
First Amendment to Trademark Assignment), the Existing Indemnification
Agreement (as amended by the First Amendment to Indemnification Agreement),
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the Existing Guaranties (as amended by the Guarantor Consents) and the
Existing Guarantor Security Agreements (as amended by the Guarantor Consents)
shall be deemed to mean and include the Existing Banks, the Additional Banks
and any other lender that hereafter becomes a signatory hereto as a Bank.
The execution and delivery by the parties of this Amended and Restated
Credit Agreement and the other instruments and documents contemplated by this
Part Two, including, without limitation, the Promissory Notes executed and
delivered pursuant to paragraph 2 of this Part Two, the First Amendment to
Security Agreement, the Second Amendment to Pledge Agreement, the First
Amendment to Mortgage, the First Amendment to Trademark Assignment, the First
Amendment to Indemnification Agreement and the Guarantor Consents, are not
intended as a novation, discharge or extinguishment of the Borrower's
existing obligations under the Existing Credit Agreement, the Existing Notes,
the Existing Indemnification Agreement or the Existing Guaranties or as a
termination or release of the Bank's security interests in the collateral
described in the Existing Security Agreement, the Existing Trademark
Assignment, the Existing Pledge Agreement, the Existing Mortgage or the
Existing Guarantor Security Agreements, all of which obligations and security
interests shall remain in full force and effect, subject to the amendments
effected by this Amended and Restated Credit Agreement, the Promissory Notes
executed and delivered pursuant to paragraph 2 of this Part Two, the First
Amendment to Security Agreement, the Second Amendment to Pledge Agreement,
the First Amendment to Mortgage, the First Amendment to Trademark Assignment,
the First Amendment to Indemnification Agreement and the Guarantor Consents.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
-66-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
DAMARK INTERNATIONAL, INC.
By
-------------------------
Title
----------------------
ADDRESS FOR BORROWER:
0000 Xxxxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx
Director of Treasury
Telephone: (000) 000-0000
Fax: (000) 000-0000
U.S. BANK NATIONAL ASSOCIATION
as a Bank and as Agent
By
--------------------------
Title
-----------------------
ADDRESS:
000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxx - MPFP0607
Telephone: (000) 000-0000
Fax: (000) 000-0000
S-1
THE SUMITOMO BANK, LIMITED,
CHICAGO BRANCH
By
--------------------------
Title
-----------------------
By
--------------------------
Title
-----------------------
ADDRESS:
The Sumitomo Bank, Limited,
Chicago Branch
000 Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attention: V.P. Credit Administration
Fax: (000) 000-0000
with a copy to:
U.S. Commercial Banking Department
4135 Multifoods Tower
00 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attention: Xxxx Xxxxxx
Telephone: (000) 000-0000
Fax: (000) 000-0000
X-0
XXXX XXX, XXXXXXXXX
By --------------------------
Title
-----------------------
ADDRESS:
000 X. Xxxxxxxxx Xxxxxx
X.X. Xxx 0000
Xxxxxxxxx, XX 00000-0000
Attention: Xxxxx Xxxxx
Telephone: (000) 000-0000
Fax: (000) 000-0000
S-3
EXHIBIT 1.1-A TO
CREDIT AGREEMENT
FORMULA FOR
BORROWING BASE
1. BORROWING BASE. The "Borrowing Base" as of any date of
determination shall be the sum of the following:
(a) the product of (i) the aggregate face amount of Eligible Accounts
that are Eligible Renewal Fee Accounts, MULTIPLIED BY (ii) 35%;
(b) the product of (i) the aggregate face amount of Eligible Accounts
that are Eligible Other Accounts, MULTIPLIED BY (ii) 50%; and
(c) an amount equal to the lesser of (i) 45% of the lower of cost
(determined on a first-in, first-out basis) or market value of Eligible
Inventory or (ii) $40,000,000.
2. DEFINITIONS. Capitalized terms used herein which are defined in the
Credit Agreement are used herein with the respective meanings attributed
thereto in the Credit Agreement. In addition, for the purposes of this
Exhibit and for determining the Borrowing Base, the following terms shall
have the following respective meanings:
"ACCOUNT": The right of the Borrower to receive payment of amounts owed
to the Borrower on account of sales of inventory (including related shipping
and handling fees), membership and other services in the ordinary course of
the Borrower's business.
"ELIGIBLE ACCOUNT": An Account which is other than an Ineligible
Account; PROVIDED, HOWEVER, that in the case of an Account that is payable in
two or more installments, the initial installment thereof shall not
constitute, or be included in, an Eligible Account; and PROVIDED, FURTHER,
that the Agent shall have the right, in the reasonable exercise of its
discretion, to establish reserves against the aggregate amount of Eligible
Accounts.
"ELIGIBLE OTHER ACCOUNT": An Eligible Account which is other than an
Eligible Renewal Fee Account.
"ELIGIBLE RENEWAL FEE ACCOUNT": An Eligible Account that is
attributable to existing club membership fees billed and automatically
renewable for a subsequent year.
"ELIGIBLE INVENTORY": Inventory other than Ineligible Inventory;
PROVIDED, that the Agent shall, notwithstanding the foregoing, have the
right, in the reasonable exercise of its discretion, to establish reserves
against the aggregate amount of Eligible Inventory.
"INELIGIBLE ACCOUNT": An Account that meets any of the following criteria:
(a) such Account has arisen out of the sale of goods and services by
the Borrower outside the United States of America and is not backed by a
letter of credit issued or confirmed by a bank chartered under the laws of
the United States of America or of any State thereof; or
(b) such Account is not the valid, binding and legally enforceable
obligation of the obligor thereon; or
(c) such Account has been subordinated by the Borrower to any other
claim against the obligor thereon; or
(d) the obligor on such Account is (i) the Borrower or an Affiliate of
the Borrower, (ii) the United States or any department, agency or
instrumentality thereof (unless the Borrower shall have complied with the
Assignment of Claims Act to the satisfaction of the Agent), (iii) a debtor
under any proceeding under the Bankruptcy Code or comparable provision of
state or foreign law, (iv) an assignor for the benefit of creditors, or (v) a
customer for whom the Borrower has tried, but has been refused, an
authorization by the applicable credit card processor in whole or in part; or
(e) such Account is not assignable; or
(f) such Account is not subject to a perfected first security interest
in favor of the Agent or is not free and clear of any other Lien; or
(g) such Account is subject to any claimed offset, counterclaim or
other defense with respect thereto (other than return rights and warranty
claims not yet asserted); or
(h) such Account is unpaid for more than 30 days from the date that
payment thereof is due; or
(i) such Account is owed by an obligor who is obligated on accounts
owed to the Borrower more than 10% of the aggregate unpaid balance of which
remains unpaid for longer than the period specified in clause (h) above; or
(j) such Account is, as reasonably determined by the Agent in its
discretion, uncollectible or otherwise disqualified; or
(k) such Account is a membership fee billed under a "free trial" offer;
or
-2-
(l) such Account is payable under an installment payment plan which
permits the obligor thereon to make payment in more than ten consecutive
monthly installments.
"INELIGIBLE INVENTORY": Inventory that meets any of the following
criteria:
(a) such Inventory is not subject to a perfected, first priority
security interest in favor of the Agent free and clear of all other Liens; or
(b) such Inventory is not located at one of the locations set forth in
the Security Agreement or in any schedule delivered pursuant thereto as a
location at which inventory is kept, or is in transit (except inventory in
transit to a location set forth in the Security Agreement or in any schedule
delivered pursuant thereto as a location at which inventory is kept and which
has been shipped pursuant to a Documentary Letter of Credit); or
(c) such Inventory is so identified to a contract to sell that it is
evidenced by an account; or
(d) such Inventory is not of good and merchantable quality free from any
defects which would affect the market value thereof; or
(e) such Inventory is inventory that the Borrower has returned or is in
the process of returning, including, but not limited to, inventory classified
by the Borrower as "C-Goods"; or
(f) such Inventory is not insured against loss or damage in accordance
with the provisions of the Security Agreement; or
(g) such Inventory is subject to or covered by a negotiable document of
title, including, without limitation, negotiable warehouse receipts and
negotiable bills of lading; or
(h) such Inventory is stored in a public warehouse or is held by any
Person as bailee, unless the terms of such storage or bailment are
satisfactory to the Agent; or
(i) such Inventory consists of packaging supplies.
"INVENTORY": Goods held by the Borrower for sale in the ordinary course
of business, less any reserves maintained by the Borrower.
-3-
EXHIBIT 1.1-B TO
CREDIT AGREEMENT
BORROWING BASE CERTIFICATE
Borrowing Base as of _____________________________, ______
To: U.S. Bank National Association:
The undersigned hereby certifies to U.S. Bank National Association that
as of the date above, the Borrowing Base for DAMARK INTERNATIONAL, INC. was
as follows:
1. Total Accounts $__________
2. Ineligible Accounts $__________
3. Eligible Accounts (Line 1 - Line 2) $__________
4. Eligible Renewal Fee Accounts $__________
5. Eligible Other Accounts (Line 3 - Line 4) $__________
6. 35% of Line 4 $__________
7. 50% of Line 5 $__________
8. Inventory on hand $__________
9. Inventory in transit under letters of credit $__________
10. Total Inventory (Line 8 + Line 9) $__________
11. Ineligible Inventory $__________
12. Eligible Inventory (Line 10 - Line 11) $__________
13. 45% of Line 12 (not to exceed $40,000,000) $__________
14. Total Borrowing Base (Line 6 + Line 7
+ Line 13, but not to exceed $60,000,000) $__________
16. Loans Outstanding $__________
17. Standby Letters of Credit Outstanding $__________
18. Documentary Letters of Credit Outstanding $__________
19. Total Outstandings
(Line 16 + Line 17 + Line 18) $__________
20. Additional Availability or (Deficiency)
(Line 14 - Line 19) $__________
Capitalized terms are used herein as defined in the Amended and Restated
Credit Agreement dated as of January 12, 1998 and the Exhibits thereto, as
the same may be from time to time amended, modified, supplemented or extended.
Date of Certificate: __________ , ____
-------------------------------
Title
--------------------------
For DAMARK INTERNATIONAL, INC.
-2-
EXHIBIT 1.1-C TO
CREDIT AGREEMENT
PROMISSORY NOTE
$[ ] [date]
Minneapolis, Minnesota
FOR VALUE RECEIVED, DAMARK INTERNATIONAL, INC., a Minnesota corporation,
hereby promises to pay to the order of [ ] (the "Bank") at the
main office of U.S. Bank National Association in Minneapolis, Minnesota, in
lawful money of the United States of America in Immediately Available Funds
(as such term and each other capitalized term used herein are defined in the
Credit Agreement hereinafter referred to) on the Commitment Ending Date, the
principal amount of [ ] AND NO/100 DOLLARS ($[ .00])
or, if less, the aggregate unpaid principal amount of all Advances made by
the Bank under the Credit Agreement, and to pay interest (computed on the
basis of actual days elapsed and a year of 360 days) in like funds on the
unpaid principal amount hereof from time to time outstanding at the rates and
times set forth in the Credit Agreement.
This note is one of the Notes referred to in the Amended and Restated
Credit Agreement dated as of January 12, 1998 (as the same may hereafter be
from time to time amended, restated or otherwise modified, the "Credit
Agreement") among the undersigned, the Bank and the other banks named
therein. This note is secured, it is subject to certain permissive and
mandatory prepayments and its maturity is subject to acceleration, in each
case upon the terms provided in said Credit Agreement.
In the event of default hereunder, the undersigned agrees to pay all
costs and expenses of collection, including reasonable attorneys' fees. The
undersigned waives demand, presentment, notice of nonpayment, protest, notice
of protest and notice of dishonor.
THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS NOTE SHALL BE
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA WITHOUT GIVING EFFECT
TO THE CONFLICT OF LAWS PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS
OF THE UNITED STATES APPLICABLE TO NATIONAL BANKS.
DAMARK INTERNATIONAL, INC.
By
--------------------------------------
Title
-----------------------------------
EXHIBIT 1.1-E TO
CREDIT AGREEMENT
BANK COMMITMENTS
Commitment
Bank Amount
---- ----------
U.S. Bank National Association $25,000,000
The Sumitomo Bank, Limited,
Chicago Branch 17,500,000
Bank One, Wisconsin 17,500,000
-----------
Total $60,000,000
ATTACHMENT 1(r) TO
CREDIT AGREEMENT
MATTERS TO BE COVERED BY
OPINION OF COUNSEL
TO THE BORROWER
AND SUBSIDIARIES
The opinion of counsel to the Borrower and the Subsidiaries which is
called for by Article III of the Amended and Restated Credit Agreement (the
"Credit Agreement") shall be addressed to the Banks and dated the date of the
Agreement. It shall be satisfactory in form and substance to the Banks and
shall cover the matters set forth below, subject to such assumptions,
exceptions and qualifications as may be acceptable to the Banks and counsel
to the Banks.
(i) The Borrower is a corporation duly incorporated and validly
existing and in good standing under the laws of the State of Minnesota and
has all requisite corporate power and authority to carry on its business as
now conducted, to enter into the Borrower Loan Documents and to perform all
of its obligations under each and all of the foregoing.
(ii) The execution, delivery and performance by the Borrower of the
Borrower Loan Documents have been duly authorized by all necessary corporate
action by the Borrower.
(iii) The Borrower Loan Documents constitute the legal, valid and
binding obligations of the Borrower, enforceable against the Borrower in
accordance with their respective terms.
(iv) The execution, delivery and performance by the Borrower of the
Borrower Loan Documents will not (i) violate any provision of any law,
statute, rule or regulation or, to the best knowledge of such counsel, any
order, writ, judgment, injunction, decree, determination or award of any
court, governmental agency or arbitrator presently in effect having
applicability to the Borrower, (ii) violate or contravene any provision of
the Articles of Incorporation or bylaws of the Borrower, or (iii) result in a
breach of or constitute a default under any indenture, loan or credit
agreement or any other material agreement, lease or instrument known to such
counsel to which the Borrower is a party or by which it or any of its
properties may be bound or result in the creation of any Lien thereunder
except as may be contemplated by the Credit Agreement.
(v) No order, consent, approval, license, authorization or validation
of, or filing, recording or registration with, or exemption by, any
governmental or public body or authority is required on the part of the
Borrower to authorize, or is required in connection with the execution,
delivery and performance of, or the legality, validity, binding effect or
enforceability of, the Borrower Loan Documents, except for
any necessary filing or recordation of or with respect to any of the Security
Documents.
(vi) To the best knowledge of such counsel, there are no actions, suits
or proceedings pending or threatened against or affecting the Borrower or any
of its properties before any court or arbitrator, or any governmental
department, board, agency or other instrumentality which (i) challenge the
legality, validity or enforceability of the Borrower Loan Documents, or (ii)
if determined adversely to the Borrower, would have a material adverse effect
on the business, operations, property or condition (financial or otherwise)
of the Borrower or on the ability of the Borrower to perform its obligations
under the Borrower Loan Documents.
(vii) As to any Security Documents which are security agreements, the
filing of the Uniform Commercial Code financing statements delivered by the
Borrower to the Banks in the filing offices listed thereon will perfect Liens
created under such security agreements to the extent such Liens are capable
of being perfected by filing financing statements under the Uniform
Commercial Code.
EXHIBIT 5.1(e) TO
CREDIT AGREEMENT
[FORM OF COMPLIANCE CERTIFICATE]
To: U.S. Bank National Association
THE UNDERSIGNED HEREBY CERTIFIES THAT:
(1) I am the duly elected chief financial officer of DAMARK
INTERNATIONAL, INC. (the "Borrower");
(2) I have reviewed the terms of the Amended and Restated Credit
Agreement dated as of January 12, 1998 among the Borrower, U.S. Bank National
Association and certain Banks named therein (the "Credit Agreement") and I
have made, or have caused to be made under my supervision, a detailed review
of the transactions and conditions of the Borrower during the accounting
period covered by the Attachment hereto;
(3) The examination described in paragraph (2) did not disclose, and I
have no knowledge, whether arising out of such examinations or otherwise, of
the existence of any condition or event which constitutes a Default or an
Event of Default (as such terms are defined in the Credit Agreement) during
or at the end of the accounting period covered by the Attachment hereto or as
of the date of this Certificate, except as described below (or on a separate
attachment to this Certificate). The exceptions listing, in detail, the
nature of the condition or event, the period during which it has existed and
the action which the Borrower has taken, is taking or proposes to take with
respect to each such condition or event are as follows:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
The foregoing certification, together with the computations in the
Attachment hereto and the financial statements delivered with this
Certificate in support hereof, are made and delivered this day of
___________, ____, pursuant to Section 5.1(e) of the Credit Agreement.
DAMARK INTERNATIONAL, INC.
By
-----------------------------
Title
--------------------------
ATTACHMENT TO COMPLIANCE CERTIFICATE
AS OF ___________, ____ WHICH PERTAINS
TO THE PERIOD FROM ___________, _____
TO ____________, _____
1. STOCK REPURCHASES (SECTION 6.6)
(a) Aggregate Purchase Price for Stock Repurchased
During Preceding 12 Calendar Months $__________
(b) Maximum Aggregate Purchase Price Permitted
under Section 6.6
COVENANT:
/ / In compliance / / Not in compliance
2. CAPITAL EXPENDITURES (SECTION 6.9)
(a) Aggregate Capital Expenditures made
in Current Fiscal Year-to-Date $__________
(b) Maximum Aggregate Capital Expenditures
Permitted Under Section 6.9 $__________
COVENANT:
/ / In compliance / / Not in compliance
3. TANGIBLE NET WORTH (SECTION 6.15) (DETERMINED AT QUARTER-END)
(a) Tangible Net Worth at such
fiscal quarter-end $__________
(b) Minimum Tangible Net Worth
Required Under Section 6.15 $__________
(i) Minimum Tangible Net
Worth requirement under
Section 6.15 as of preceding
fiscal year-end ($50,551,000
for 1996 fiscal year-end) $__________
(ii) 75% of cumulative Net
Income during current
fiscal year to date $__________
(iii) Minimum Required Tangible
Net Worth as of quarter-end
(Line 3(b)(i) + Line 3(b)(ii)) $_________
COVENANT:
/ / In compliance / / Not in compliance
4. MINIMUM EBITDA (SECTION 6.19) (DETERMINED AT FISCAL QUARTER-END FOR THE
FOUR FISCAL QUARTERS THEN ENDED)
(a) Calculation of EBITDA
(i) operating income $__________
(ii) PLUS depreciation $__________
(iii) PLUS amortization $__________
(vi) EBITDA (Sum of Lines 4(a)(i) through
Line 4(a)(iii)) $__________
(b) Minimum EBITDA Required
Under Section 6.19 $__________
COVENANT:
/ / In compliance / / Not in compliance
- 2 -
5. FIXED CHARGE COVERAGE RATIO (SECTION 6.16) (DETERMINED AT QUARTER-END FOR
THE FOUR FISCAL QUARTERS THEN ENDED)
(a) EBITDA (Line 4(a)(iv)) $__________
(b) Operating Lease Expense $__________
(c) Sum of Line 5(a) plus Line 5(b) $__________
(d) Calculation of Fixed Charges:
(i) Net Interest Expense $__________
(ii) PLUS Capital Expenditures $__________
(iii) LESS Capital Expenditures
made from specific equity
capital with Bank consent $__________
(iv) PLUS Operating Lease Expense $__________
(v) PLUS Cash Taxes $__________
(vi) Fixed Charges (Sum of
Lines 5(d)(i) through 5(d)(iv)) $__________
(e) Fixed Charge Coverage Ratio
(Line 5(c) to Line 5(d)(iv)) ______ to 1.00
(f) Minimum Fixed Charge Coverage
Ratio Required by Section 6.16 ______ to 1.00
COVENANT:
/ / In compliance / / Not in compliance
- 3 -
6. RATIO OF TOTAL FUNDED DEBT TO EBITDA (SECTION 6.17) (DETERMINED AT FISCAL
QUARTER-END FOR THE FOUR FISCAL QUARTERS THEN ENDED)
(a) Calculation of Total Funded Debt
(i) Aggregate Principal Balance of
Outstanding Loans $__________
(ii) PLUS Aggregate Stated Amount
of Outstanding Standby
Letters of Credit $__________
(iii) Total Funded Debt
(Line 6(a)(i) + Line 6(a)(ii)) $__________
(b) EBITDA (Line 4(a)(iv)) $__________
(c) Ratio of Line 6(a)(iii) to Line 6(b) ______ to 1.00
(d) Maximum Ratio Permitted Under
Section 6.17 3.00 to 1.00
COVENANT:
/ / In compliance / / Not in compliance
7. TRADE SUPPORT RATIO (SECTION 6.18)
(a) Total Trade Accounts $__________
(b) Total Inventory $__________
(c) Ratio of Line 7(a) to Line 7(b) ______ to 1.00
(d) Minimum Ratio Required Under
Section 6.18 .475 to 1.00
COVENANT:
/ / In compliance / / Not in compliance
- 4 -
EXHIBIT 6.2(c) TO
CREDIT AGREEMENT
LEGAL DESCRIPTION
XXX 00, XXX XXX XXXX XXXXX-XXXXXXX XX XXX 00 AS MEASURED ON THE NORTH AND
SOUTH LINES OF SAID LOT 24, TOGETHER WITH THE SOUTH 30 FEET OF LOT 24 LYING
WEST OF SAID EAST THREE-FOURTHS OF SAID XXX 00, XXX XX XXXXXXXX XXXXXXX,
XXXXXXXX XXXXXX, XXXXXXXXX.
